The US dollar this week rose to its strongest level against the euro in 11 years, as the Swiss National Bank’s (SNB) decision to scrap the franc’s cap steered investors into the world’s top reserve currency.
Meanwhile, the euro posted its biggest weekly loss versus the yen since July 2012, as Der Spiegel magazine reported that European Central Bank (ECB) President Mario Draghi briefed Germany officials on a sovereign bond-buying plan.
The greenback snapped a five-day skid against the yen after data showed US consumer confidence rose to the highest level since 2004.
Photo: AFP
The US dollar, which represents 63 percent of all known international reserves, surged 0.6 percent to US$1.1567 per euro at 5pm in New York on Friday and touched US$1.1460, the strongest level since November 2003. It gained 1.2 percent to ￥117.51.
The euro rose 0.6 percent to ￥135.95, narrowing its loss against the Japanese unit to 3.1 percent this week.
The franc dropped 1.9 percent to SF0.9941 per euro after surging to a record SF0.85172 and fell 2.3 percent to SF0.8587 per US dollar.
The Bloomberg Dollar Spot Index, which tracks the US currency against 10 major peers, climbed 0.2 percent to 1,139.27 to trim its first weekly loss in more than a month to less than 0.2 percent.
JPMorgan Chase & Co’s index of global currency volatility rose to as much as 11.68 — the most since June last year — up from last year’s low of 5.28 percent.
The SNB surprised markets on Thursday by abandoning its three-year-old cap of SF1.20 per euro on the franc. Policymakers also reduced the interest rate on sight deposits, deepening a cut announced less than a month ago.
“One of the reactions from the SNB decision was they knew the ECB will be embarking on monetary policy expansion,” Brian Daingerfield, a currency strategist at Royal Bank of Scotland Group PLC’s RBS Securities unit in Stamford, Connecticut, said by telephone.
The 19-nation currency posted a fifth weekly decline against the US dollar before the region’s policymakers meet on Thursday next week to discuss introducing new stimulus, including quantitative easing.
The plan that Draghi presented to German Chancellor Angela Merkel and Minister of Finance Wolfgang Schaeuble described quantitative easing plans under which central banks would buy bonds issued by their own country, Der Spiegel said in an article published yesterday, without saying where it got the information.
Greece would be excluded from the program because its bonds do not fulfill the necessary quality criteria, the magazine said. An ECB spokesman declined to comment.
In London, the pound posted its biggest weekly advance in almost two years against the euro as speculation the ECB will start government bond purchases stoked demand for the UK currency as a haven.
The SNB’s move also pushed sterling to its strongest level versus the 19-member common currency since February 2008.
The pound advanced 2.5 percent to ￡0.7617 per euro at 5pm in London on Friday, after touching ￡0.7596. Sterling declined 0.1 percent to US$1.5143.
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