Dollar hits highs against euro, franc after Draghi fuels QE bets

Monday, 5 January 2015 00:00 - - {{hitsCtrl.values.hits}}

NEW YORK (Reuters): The U.S. dollar hit its highest against the euro in 4-1/2 years on Friday and reached parity with the Swiss franc after comments from European Central Bank President Mario Draghi underscored the divergence between European and U.S. monetary policy. The euro fell to $1.2002, its lowest since June 2010, after Draghi told the German financial newspaper Handelsblatt that the ECB was less likely to preserve price stability than it was six months ago, suggesting it was ready to take bolder steps on monetary stimulus early this year. “Markets and commentators have been talking about this for ages, but to hear it from the horse’s mouth has had a clear effect on the euro,” said David Rodriguez, a quantitative strategist at DailyFX.com, a unit of retail FX broker FXCM in New York. The euro zone single currency was also hurt by disappointing euro zone manufacturing data. The dollar index, which measures the greenback against a basket of six major currencies, hit a fresh nearly nine-year high of 91.131 and notched its third straight weekly gain. The contrast between the U.S. Federal Reserve’s path toward rate increases and looser policies in Europe and Japan boosted the dollar last year, and many analysts anticipate that divergence in policy to fuel a continued dollar rally in 2015.

Sterling slides to 17-month low as 2015 rate hike looks remote

LONDON (Reuters): Sterling got off to a sorry start to the year on Friday, sliding under $1.54 to a 17-month trough as weak manufacturing data bolstered bets that the Bank of England will not raise interest rates until 2016. The pound fell as low as $1.5369, its weakest since early August 2013, leaving it down 1.4 percent on the day, its steepest fall in four months. The monthly survey of UK purchasing managers (PMI) showed the manufacturing sector expanded at a much slower pace than expected in December. Other data showed lending to British consumers surged at the fastest rate in almost a decade in the three months to November. Taken together, the figures suggested Britain’s upturn, one of the strongest among advanced economies in 2014, will remain biased towards consumption rather than other sources of growth such as investment and exports.