The euro strengthened for a fifth day versus the dollar, headed for its biggest weekly gain in almost two years, amid speculation inflation pressure may spur the European Central Bank to raise borrowing costs this year.
The common currency was set for a weekly advance versus all of its 16 major counterparts as traders bet European finance ministers may next week reinforce measures to stem the region’s debt crisis. ECB President Jean-Claude Trichet yesterday signaled he’s prepared to raise interest rates if needed. The Dollar Index dropped a fifth day as confidence in the U.S. economic recovery wavered and the Swiss franc declined.
“If the periphery is to be ring-fenced, the ECB can concentrate more on price stability,” said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. “People have quite rapidly moved away from the U.S. growth story and are clearly focusing on the euro. Pure hawkishness on the part of Trichet yesterday is a driver for the euro.”
Europe’s currency headed for a weekly gain versus the greenback after the Federal Statistics Office in Wiesbaden said today the German inflation rate, calculated using a harmonized European method, rose to 1.9 percent in December from 1.6 percent in November. That’s the fastest since October 2008. Spain’s underlying inflation rate accelerated in December at the fastest pace in almost two years, a separate report showed.
EUR/USD: traded within $1.3460-$1.3320.
GBP/USD: consolidated near resent highs.
USD/JPY: eased to Y82.40, but bounsed back to Y83.
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