Dollar rides high as ECB set to boost eurozone stimulus
NEW YORK: The dollar rode high Monday as the European Central Bank looked set to inject more stimulus into the eurozone this week.
Amid widespread expectations the ECB will announce additional stimulus measures after its policy meeting Thursday, the euro fell to a fresh seven month low against the dollar.
The euro sank to $1.0558 before edging up to $1.0566 around 2200 GMT. The shared currency bought $1.0595 at the same time Friday.
“The dollar called it a month on top of most major currencies amid expectations for lower rate policies to soon become reality in the eurozone,” said Joe Manimbo, senior market analyst at Western Union Business Solutions.
Analysts said there was some caution in the market ahead of news-packed week. In addition to the ECB meeting, the Reserve Bank of Australia holds a policy meeting on Tuesday and the Bank of Canada holds its on Wednesday.
Federal Reserve Chair Janet Yellen speaks Wednesday and testifies in Congress Thursday. On Friday, the US jobs report for November is published, which could be pivotal in the Fed’s deciding whether to raise near-zero interest rates in December. Markets have already baked in a liftoff.
“We have heavy event risk in the opening week of December, the lingering threats of systemic risks listed by the IMF and other groups, as well as the eagerly anticipated December 16 Fed rate decision,” said John Kicklighter, senior currency strategist at DailyFX.
The International Monetary Fund earlier Monday announced a landmark decision to add China’s yuan to its elite currency reserve basket. The yuan, also known as the renminbi, will join the Special Drawing Rights basket on October 1, 2016.
“While the renminbi’s inclusion is arguably supportive of the currency, and the Chinese central bank’s ongoing actions have also offered support for the renminbi at times, our overall view remains for moderate renminbi weakness over the medium- term,” said Nick Bennenbroek, head of currency strategy at Wells Fargo Securities.
The yuan was little changed, at 6.398 per dollar.