On Monday the euro fell against the dollar, snapping a five-day gain, on concern the region’s debt crisis will worsen even as European finance ministers meet today to hammer out a new strategy to stem the contagion.
Australia’s dollar dropped to a six-week low versus New Zealand’s on concern record flooding will curtail economic growth.
The biggest ever month-on-month rise in UK consumer inflation pushed sterling back above $1.60 against the dollar on Tuesday as investors brought forward their expectations of the next rise in interest rates.
Britain’s consumer price index was driven to an eight-month high of 3.7% in December, from 3.3% in November, data revealed on Tuesday. The month-on-month increase of 1% was the largest on record.
The annual number was ahead of the Bank of England’s forecast of 3.2% and was driven by rising oil and fuel costs and food bills. Last month the Bank left interest rates at the historic low of 0.5%.
On Wednesday the dollar fell to an eight-week low against the euro on speculation a sluggish recovery in U.S. housing and labor markets will deter the Federal Reserve from raising interest rates.
The U.S. currency dropped to the lowest in two weeks versus the yen before reports today forecast to show continuing jobless claims increased. It also fell after data yesterday revealed China’s overall holdings of U.S. government debt declined in November.
The euro rose after the region’s finance ministers made a commitment to increase the size of a bailout fund to tackle the debt crisis.
On Thursday the Australian and New Zealand dollars declined against most of their major peers as speculation that China will take more measures to cool growth dented demand for higher-yielding currencies.
The U.S. currency and the yen strengthened as equity losses boosted demand for a refuge. Data showed China’s economic growth accelerated, adding to pressure for monetary tightening.
The dollar pared gains against the common currency before data that economists predict will show U.S. continuing jobless claims increased and home-sales growth slowed.
China’s economic growth quickened to an annual rate of 9.8% in the fourth quarter, up from 9.6% in the prior three months, the statistics bureau said. Consumer prices rose 4.6% in December from a year earlier, compared with 5.1% the previous month.
On Friday the euro rose against the dollar, reaching the strongest level in almost two months, as a report showed business confidence in Germany jumped last month, boosting optimism in the region’s economic recovery.