The European Single Currency, euro, on Tuesday, February 13, jumped to a daily high of $1.2351, up 0.5 percent, as gains in global equity markets encouraged traders to sell the dollar and tiptoe back into riskier assets.
“It’s an interesting combination of the return of risk appetite and U.S. bond yields also dragging the dollar,” said Alvin Tan, London-based FX strategist at Societe Generale, adding there was little euro-specific news to push the single currency higher.
A sharp sell-off in stock markets last week drove traders to unwind one of the most popular bets of the year – buying the euro on expectations the European Central Bank will scale back its stimulus later this year amid a strong recovery in the bloc’s economy.
Although many market players remain bullish on the euro, the currency lacks clear catalysts for further gains as a March election in Italy and a fragile coalition deal in Germany create an uncertain political backdrop.
Though risk appetite appears to be recovering, emerging market currencies that sold off last week failed to make much headway, with the Turkish lira, Mexican Peso and Russia’s rouble all treading water.
The commodity-linked Australian and Canadian dollars were also trading flat.
Prospects of higher inflation globally have rattled investors this month and have helped drive equity market falls.
“Market sentiment is still fragile,” Tan said.
Meanwhile, The yen has gained 1.5 percent against the dollar this month, benefiting last week from a rush by investors into currencies deemed safer amid the rout in equity markets.
The British Pound Sterling jumped against the dollar on continuing a modest rebound from three-week lows hit on Friday.
