Demand for the dollar weighed on euro which was close to near two-week lows on Friday just above $1.0993 hit earlier this week.
A combination of record low currency market volatility and hopes the United States and China would be able defuse their damaging tariff war with a preliminary trade deal boosted demand for the greenback. Trading ranges in euro/dollar, the most liquid currency pair in the world, were the narrowest in 20 year.
Trading was quieter than usual with U.S. markets shut overnight for the Thanksgiving holiday.
Broadly, the U.S. currency gained against its peers from data showing the world’s biggest economy is on a firm footing, which prompted investors to scale back rate-cut bets. U.S. economic growth picked up slightly in the third quarter, data showed, in contrast to other indicators pointing to a slowdown in global activity.
The Federal Reserve also flagged an upbeat outlook amid signs of labour market strength and a possible turnaround in business investment.
Though data showed eurozone inflation accelerated faster than expected in November on a rise in food and services prices. Annual inflation rates remained far lower than European Central Bank expectations. ECB members are discussing the potential for a new definition of the inflation target, which now stands at below, but close to 2%.
Further, implied volatility gauges for both cable and euro-sterling maturing on Dec. 13 – the day the Dec. 12 election results will be known – were at their highest in five weeks. Investors hedged their bets for election uncertainty.
START TRADINGForex – Hit by strong dollar Euro sets for two-week lows
The dollar drifted lower on the yen and against the Australian and New Zealand dollars, but not much.
Against a basket of currencies, the dollar was broadly steady around 98.37, but set for the biggest monthly gain since July.
Dollar bought 109.46 yen, and if it holds there will post a 0.7% gain for the week and hit its highest weekly close since May 31.
The Australian dollar was slightly weaker for the week hit by the strong greenback. But it was 0.1% stronger on Friday. It last traded at $0.6775, lifting it from a six-week low hit on Thursday.
The New Zealand dollar rose by the same margin to $0.6424 to be a little stronger for the week, buoyed by rebounding business sentiment.
The pound slipped back below $1.29 on Friday. Implied volatility gauges with a two-week maturity, straddling the UK’s general election date, jumped. Despite some gains from the poll, sterling is heading for its quietest month since August, down around 0.2% so far in November.
Versus the dollar, the pound slipped below $1.29 and against the euro it was flat at 85.350 pence.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money