The European Single Currency, Euro, on Tuesday, August 22, against the dollar on, retracing most of its overnight gains as a broadly resurgent greenback prompted investors to square positions in a thin market before a central bank conference this week.
The single currency EUR=EBS dipped by 0.6 percent against the greenback to $1.1750, retracing most of its overnight gains when it posted its biggest single day rise so far this month.
“Our bias in these thin markets is to sell the euro on rallies against the dollar as we think underlying positioning is still quite stretched,” said Adam Cole, chief currency strategist at RBC Capital Markets in London.
Friday’s speech by European Central Bank President Mario Draghi is among the set-piece events at the Jackson Hole symposium, where remarks by his Federal Reserve counterpart Janet Yellen on the same day will be the main focus.
With speculative bullish bets on the euro still near its biggest in five years, according to latest positioning data, some investors think the euro’s strength may likely fade given the central bank’s recent cautious stance about the currency.
Since hitting a 2-1/2 year high near $1.1910 in early August, the common currency has lost some steam, as investors took on board the cautious tone struck by ECB policymakers revealed in the minutes of their July meeting.
Draghi will refrain from delivering a new policy message, two sources familiar with the situation told Reuters last week, tempering any expectations for the ECB to start charting the course out of its quantitative easing (QE) stimulus programme.
“The euro has become slightly vulnerable after the recent rise and unless Draghi comes out and says anything significant, we expect the currency to remain under pressure,” said Piotr Matys, an FX strategist at Rabobank in London.
The euro’s losses were also exacerbated by a broad bounce in the dollar against most of its rivals in mid-morning trades.
It hopped 0.4 percent .DXY higher against a trade-weighted basket of its currencies on Tuesday. The sterling fell to a six-week low against the dollar GBP=D3.
