The dollar climbed broadly today, hitting its highest level in three weeks against the yen as rising share prices eased some risk aversion and put the Japanese currency under selling pressure.
A 1.4 per cent rise in European shares hit the yen, which has benefitted from falling stock prices in past months, and helped to push the dollar to its strongest against a basket of currencies and the euro since mid-December.
"Stocks are firming, and there seems to be a slight bias towards risk taking," said Steve Barrow, head of G10 currency research at Standard Bank in London, adding that the yen was taking the biggest hit from the move.
The dollar climbed 0.8 per cent to 92.97 yen according to Reuters data, its highest since early December. The euro, which had been nearing parity against sterling at the end of December, was trading at 94.3 pence at 10.15am.
Gains against the yen prompted dollar buying across the board, pushing the dollar index to 82.722, its strongest since December 15th.
The euro fell 1.5 per cent to $1.3662 according to Reuters data, its lowest since mid-December, and pulled away from a session high of $1.3963 hit earlier in the day.
"The move up in dollar/yen is boosting the dollar across the board," said Rob Miniken, senior currency strategist at Standard Chartered in London.
Some in the market said that the single European currency was also coming under selling pressure after European Central Bank Vice President Lucas Papademos said last night more interest rate cuts may be needed to shield the euro zone economy from recession.
Mr Papademos's comments were seen as dovish compared with statements from other ECB officials that had stoked speculation the central bank may hold back from cutting rates aggressively in the near future.
Figures today showed Spain's EU-harmonised inflation tumbled to a 10-year low of 1.5 per cent in December, adding evidence that price pressure in the euro zone may be easing.
Reuters
