The european single currency, euro slipped on Monday, August 21,extending its biggest weekly decline in more than two months as markets judged the single currency’s double-digit gains this year may be too much for a central bank that is still wary of removing stimulus.
The single currency fell 0.17 percent to $1.1740 against the U.S. dollar, after weakening 0.5 percent last week, its biggest weekly decline since June. 9, according to Reuters data. (Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh)
It is still up more than 11 percent so far this year, making it the best performing currency in the G10 currency universe.
“Absent some Mario Draghi fireworks this week, buying on dips for euro/dollar may be a better strategy rather than chasing the euro higher at these levels,” said Viraj Patel, an FX strategist at ING Bank in London.
European Central Bank President Mario Draghi will not deliver a new policy message at a Fed conference in Jackson Hole this week, two sources familiar with the situation have said, tempering expectations for the ECB to start charting the course out of stimulus.
But traders are not taking any chances. About $45 billion of euro-dollar currency options on the exchange rate will expire in the three days leading up to the Wyoming meeting.
With markets hemmed in tight ranges and the lack of any top tier data this week, the dollar index .DXY drifted higher to 93.56 on Monday with latest positioning data showing speculators reducing their bearish bets against the greenback,Reuters reports.
Investors cut short dollar bets, particularly against the Japanese yen with positioning seen stretched before Janet Yellen’s speech on Friday at the Jackson Hole conference.
“With the market now short-USD and with market participants knowing that the preponderance of positions is short-USD, the pace of downward movement almost invariably had to slow,” BMO strategists wrote in a weekly note.
