The euro surged to fresh four-year highs against the dollar, sterling and the yen today on a wave of investor concerns about the health of the US economy ahead of a Federal Reserve meeting later.
The Fed's policy setting committee will announce an interest rate decision at 7.15 p.m (Irish time). Few in the market expect a cut this month, but many worry rates may have to fall next month, depressing slim returns on US fixed income assets even more.
The euro's rise against the dollar has snowballed in recent weeks, with poor economic data leaving foreign investors ever-more wary of sending savings to the United States, while a huge US trade deficit ensures steady outflows to pay for imports.
The euro charged to $1.1358 in European trade, its highest in four years and up half a per cent on the day. The euro is now up 8 per cent on the dollar this year.
A Reuters survey of euro zone services companies showed on Tuesday businesses were more optimistic about the future after fighting ended in Iraq, even though business kept shrinking.
"The euro is the best of the Big Three. It's not a huge desire to buy euro assets but people aren't confident buying yen given what the Bank of Japan might do," said Mr Rob Hayward, senior currency strategist at ABN Amro.
Japan's economy is stagnating and Japanese ruling party lawmakers have proposed steps to lift the stock market from near 20-year lows. Those steps include reducing selling by pension funds and encouraging buying by the central bank and postal system.