The Euro was staying afloat near an eleven month high pitted against the dollar with increasing signs of recovering economic optimism in the Eurozone while the Japanese yen went down to nearly two years of significant low standing versus the dollar on high hope of more monetary reduction in Japan.
Statistics have shown that European banks are reimbursed more than expected of the crisis loan they borrowed from the European Central Bank (ECB) during the peak of the debt crisis, as an indication of their sturdy economic growth as shown by their confidence.
German business morale also boosted its improvement for a third consecutive month from last year to its peak more than half a year which is evident of Europe’s expanding economy. The Euro fetched around $1.3459 flat from US levels but roughly not too far below its 11 month high of $1.3492.
The controversial single currency seems to face several major setbacks near the $1.35 including its 2012 high of $1.34869, half of the retracement from the high in May two years ago to the low in July last year was psychologically vital to reach the $1.3500 level.
Moreover, the Euro was also aided by the perception that the ECB’s monetary policy is less free than compared to the US Federal Reserve.
Although the Fed is presently taking an accommodating stand, the ECB is reluctant. The fact that banks are remitting their loans back to ECB also resulted in smaller balance sheet at the ECB according to an anonymous trader at a Japanese bank. The variations in the monetary policy stance are probably going to help the Euro in the short term.
The singular currency also landed a 21-month peak against the yen to 122.90 yen after its 2011 high of 123.33 which economists set their eyes upon.
Conversely, the yen had no pardon from its two-month-old down trend that hit a two and a half year low against the greenback on hopes of further monetary reduction.
During the said weekend, Japan’s economy minister refuted criticism that hi government’s extraordinary fiscal and monetary incentive programme was directed to purposely weaken the Japanese currency. The US dollar reached as far as 91.26 yen which is its highest level for the last three years.
The decline of the yen consequently reflected an increase in US bond yields with which the currency has an inverse connection. The 10-year US bond yield reached staggering heights, helped by optimism on the global economy. Wall Street shares also received favourable gains with the S&P 500 index garnering a five-year record high.