x
Breaking News
0

Euro set for worst week since 2016 as dollar extends rally

ForexFeb 09, 2018 07:34AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Illustration photo of U.S. Dollar and Euro notes

By Tommy Wilkes

LONDON (Reuters) - The dollar rose on Friday to extend its recent gains while the euro was headed for its worst weekly performance since Nov. 2016 after the global stock market sell-off squeezed investors positioned for a weaker greenback.

Betting on a weaker dollar versus the euro has been one of the most popular trades this year, with a resurgent European economy fuelling expectations the European Central Bank will shrink its balance sheet sooner than expected.

After earlier rising, the euro slipped and was down 0.1 percent at $1.2234 at 1215 GMT, bringing weekly losses to 1.7 percent. So far this year, the euro remains 2 percent higher. It hit a three-year high of $1.2538 in late January.

More broadly, the dollar against a basket of currencies was up 0.3 percent and has now gained 1.4 percent <.DOXY> this week, the best performance since November 2016. The U.S. currency remains down 1.8 percent this year, however.

Stephen Gallo, European Head of FX Strategy at BMO Capital Markets, said the sell-off "in equity markets and risk assets has led to a healthy correction in FX markets, in the short dollar positions getting squeezed."

Gallo said that unless there was a fundamental shift in the health of the global economy, which this week's downturn in equity markets did not imply, the dollar remained in a "multi-year downward trend.

"Don't let this take your eye off the longer-term picture of dollar weakness," he said.

The dollar recovered some ground against the yen in early European trading after earlier falling to near four-month lows as investors sought out safety in the Japanese currency.

The slump in stock prices continued in Asia and Europe on Friday.

The U.S. House of Representatives joined the Senate in approving a bill to end an overnight federal shutdown, averting serious interruption of the government's business that could have hit sentiment towards the dollar.

REDUCING RISK

Before this week's market mayhem, one of the most popular trades in the currency market was to buy the euro on expectations of unwinding of stimulus by the ECB and to sell the yen on the view that the Bank of Japan will be the last to exit from its ultra-loose policy.

Many market players are closing existing positions rather than making new bets as they look to reduce risk exposure during the pick up in volatility.

Equity market volatility has surged this week, and while foreign exchange markets have remained far calmer, the carnage this week has upended some popular trades.

UniCredit said it was closing a short position in the euro versus the Norwegian krone after the sell-off penalized the previously buoyant currency and Norwegian price growth in January came in weaker than expected.

"We remain constructive on the Norwegian krone given its still-huge undervaluation according to our models...but will probably wait for more evidence of rising inflation at home and more-stable markets before proposing this trade again," UniCredit strategists said in a note.

The euro was up 1.3 percent at 9.8275 (EURNOK=) after the krone earlier weakened to its lowest level since December.

Emerging market currencies as well as commodity-linked currencies like the Canadian and Australian dollars, which have enjoyed a strong run against the U.S. currency, have also been hit by this week's turmoil.

The Swiss franc (EURCHF=), another currency investors turn to as a perceived safe haven, hit a near four-month high against the euro at 1.1460 francs before falling back to trade at 1.1475.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets

Euro set for worst week since 2016 as dollar extends rally
 

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

 
Are you sure you want to delete this chart?
 
Write your thoughts here
 
Replace the attached chart with a new chart ?
Post
Post also to:
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
 
Replace the attached chart with a new chart ?
Post 1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email