Speculation that monetary policies in the US and Europe will diverge caused the euro to fall for a third day against the dollar.
The single currency slid against all except one its 16 major peers as Goldman Sachs Group said the European Central Bank's quantitative easing programme will send it toward parity against the greenback. The euro also weakened as the dollar gained after a surge in US home sales on Monday revived bets the Federal Reserve will raise interest rates this year.
“The ECB will stay the course as far as QE’s concerned,” said Derek Mumford, director at Rochford Capital, a currency risk-management company in Sydney. “It’s amazing how one strong housing number turned around sentiment towards the US dollar.”
The euro fell 0.6 per cent to $1.1279 as of 7.01 am in London after dropping 0.2 per cent during the previous two days. The shared currency declined 0.3 per cent to 139.47 yen. The dollar rose 0.2 per cent to 123.63 yen.
European leaders gave Greek prime minister Alexis Tsipras’s government 48 hours to make a final effort to satisfy creditors and end a five-month standoff. Leaders from Greece’s 18 fellow euro-zone countries agreed to step up the pace of negotiations to secure a breakthrough on Wednesday that leaders can sign off at the end of the week.
Euro decline
The euro has slumped 3.9 per cent this year, the worst performer after New Zealand’s dollar of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.
A gauge of the dollar advanced for a third day after data on Monday showed sales of previously owned US homes rose to the highest level since November 2009 last month.
“The market’s still very much using periods of US dollar weakness to accumulate long positions,” said Jonathan Cavenagh, a foreign-exchange strategist at Westpac Banking Corp in Singapore. “Certainly euro up into that $1.14, $1.15 region still looks like a good sell ahead of the first Fed hike.”
The US central bank will likely increase borrowing costs in September and December, he said.
Bloomberg
