The US dollar was broadly lower on Friday as the euro rose to just under a four-month high, with negotiations underway between EU leaders on a recovery fund that could lift the bloc out of recession.
EU leaders’ views on a mass stimulus plan remained “diametrically different,” Czech Prime Minister Andrej Babis said on Friday.
The 27 EU heads are struggling to reach consensus on the 2021-1027 budget, proposed at above 1 trillion euros (US$1.14 trillion), and a linked new recovery fund worth 750 billion euros, meant to help rebuild southern economies most affected by the pandemic.
The euro was up 0.49 percent at US$1.144 late in the North American session, just off Wednesday’s top of US$1.145, its highest since the coronavirus financial crash in March.
“A positive outcome by the end of the EU summit Saturday could potentially be the euro’s ticket to fresh highs for the year,” said Joe Manimbo, senior market analyst at Western Union Business Solutions.
If progress is made, the euro could break through the technically significant US$1.15 level, which has not been touched since February last year.
“Conversely, a disappointing outcome that merely kicks the fiscal can down the road would risk an unwinding of recent euro gains,” Manimbo said.
Implications for the euro should the EU go ahead with its plan would be long-lasting, Marshall Gittler, head of investment research at BDSwiss, told his clients.
A deal “would make the euro more attractive as a reserve currency” by “establishing a central fiscal capacity that can respond to adverse shocks, which would make monetary union more stable,” he said.
The dollar index, which heavily weights the euro, was 0.36 percent lower at 95.930. The dollar was also weaker against the yen and the Swiss franc, as a risk-on move diminished appetite for safe-haven assets and bolstered US equities.
The greenback’s fall against rival safe-havens could suggest its appeal, even in times of crisis, has been waning given the resurgence of coronavirus infections in the US.
Meanwhile, the New Taiwan dollar rose NT$0.003 against the US dollar on Friday to close at the day’s high of NT$29.593, a 0.07 percent increase from NT$29.613 a week earlier.
Turnover totaled US$1.08 billion during the trading session.
Additional reporting by staff writer, with CNA
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