The euro hit a five-week high against the dollar and the yen today as solid US economic data and signs of ultra-low interest rates for years to come from the US Federal Reserve stoked appetite for riskier assets.
Fed chairman Ben Bernanke said the US central bank might consider further monetary easing through bond purchases. It also pushed back the likely timing of an eventual interest rate hike to late 2014, and set a formal inflation target of 2 per cent.
"In the afterglow of the Fed's decision yesterday to keep interest rates low for a longer period of time, today's generally positive US data gave investors a fresh reason to move into riskier assets," said Joe Manimbo, market analyst at Travelex Global Payments in Washington.
The euro advanced to a session high of $1.3176 after the US data were released, trimming gains to trade most recently at $1.3152. Against the yen, the euro rise as high as 102.20 yen before trading more recently at 102.07 yen. Those session highs marked the euro's strongest position against the US and Japanese currencies in about five weeks.
Traders also said the euro was boosted by media reports that Greece's private creditors were willing to lower their "final offer" of a 4 per cent interest rate on new Greek bonds in order to clinch a deal in time to avert a messy default.
"The markets are trading in a way that they believe a disorderly Greek default is unlikely," said Alan Ruskin, head of G10 currency strategy at Deutsche Bank in New York.
Still, he noted, "we've seen so many false alarms in terms of resolution."
Wall Street rose at the open today on a combination of an extended easy monetary policy from the Federal Reserve, strong earnings from Caterpillar and solid US economic data.
New US claims for unemployment benefits rose last week, but the underlying trend continued to point to improving labour market conditions. Data also showed that new orders for US manufactured goods rose more than expected in December, while a gauge of business spending plans rebounded.
The Dow Jones industrial average rose 43.51 points, or 0.34 per cent, at 12,800.47. The Standard & Poor's 500 Index added 2.72 points, or 0.21 per cent, at 1,328.78. The Nasdaq Composite Index gained 10.44 points, or 0.37 per cent, at 2,828.75.
National benchmark indexes advanced in all 18 western European markets today. The UK's FTSE 100 Index rose 1.4 per cent, France's CAC 40 Index added 1.5 per cent and Germany's DAX Index gained 1.8 per cent.
The Stoxx Europe 600 Index added 1.2 per cent to 257.97 at 3pm in London. The benchmark gauge has rallied 20 per cent from its low on September 22nd amid signs that the US economy is recovering and speculation that the euro area will contain its debt crisis.
"Bernanke is saying he's 'all in' as long as the recovery isn't any stronger," said Henrik Drusebjerg, a Copenhagen-based strategist at Nordea Bank AB, who helps oversee $230 billion.
Agencies
