The European Single Currency, euro soared on Monday, February 12, and the dollar fell back, as a bounce in equity markets ended a strong run for the greenback in which nervous investors had rushed to reverse their bets against the U.S. currency.
The euro was up 0.2 percent at $1.2275 after earlier hitting a day’s high of $1.2298. The euro suffered its worst week since November 2016 last week.
Some appetite for risk-taking crept back into currency markets after last week’s slump, helping higher-yielding emerging market currencies as well as commodity-linked currencies like the Australian and Canadian dollars, although the gains were limited.
Asian share markets found a semblance of calm on Monday as S&P futures extended their bounce, while European indexes opened higher as volatility eased back following last week’s spike.
The sell-off last week spilled over into currencies, forcing many traders to unwind their bets on a stronger euro and to exit higher yielding but riskier currencies and seek safety in the Japanese yen and Swiss franc.
The moves in foreign exchange markets were far more muted than in other asset classes, however.
“We have a little bit of risk appetite back into the market,” said Nordea Markets currency strategist Niels Christensen, adding that the U.S. consumer price inflation numbers due on Wednesday would be the decisive data for direction this week,Reuters reports.
“The market is still extremely long positioned on the euro. These investors will be quick to reduce their positions,” he said.