Euro rebounds to six-month high, while dollar steadies

London - The euro climbed to a six-month high, rebounding from an early decline, after Chancellor Angela Merkel said the common currency was “ too weak.” The dollar stabilised in a narrow range following the biggest weekly slump since July.

Europe’s common currency rose as much as 0.3% to $1.1236, its strongest level since November 9, after dipping to $1.1162 earlier. The euro is weak because of the European Central Bank’s (ECB) accommodative policy, and that has made German exports cheaper, Merkel told school students in Berlin.

The Bloomberg Dollar Spot Index was little changed as of 12:50, after sliding 1.6% last week.

The pound was the worst Group-of-10 performer after the UK threatened to quit Brexit talks unless the European Union drops its demands for a divorce payment as high as €100bn.

Sterling weakened against all its major peers also as polls predicted a narrower-than-expected win for Prime Minister Theresa May in June elections.

“The path of least resistance for the euro is higher,”  Vasileios Gkionakis, strategist at UniCredit SpA, said in emailed comments. “Economic dynamics are solid, eurozone political risk premia are priced out and the US administration is a headwind for the dollar.”

Still, the greenback may gain this week, with market focus moving away from the US political turmoil that sent it lower last week as President Donald Trump visits the Middle East, according to Bank of America-Merrill Lynch.

“The dollar was oversold last week,” Athanasios Vamvakidis, head of Group-of-10 currency strategy at the US bank said in emailed comments.

“Trump’s trip could lead to some positive headlines, taking attention away from the many negative headlines related to the FBI and Russia last week. We could see some dollar upside this week, but unlikely to be a new trend.”

Read Fin24's top stories trending on Twitter:

ZAR/USD
16.72
(+0.29)
ZAR/GBP
21.01
(+0.48)
ZAR/EUR
19.07
(+0.04)
ZAR/AUD
11.67
(-0.03)
ZAR/JPY
0.16
(+0.46)
Gold
1809.01
(+0.39)
Silver
19.23
(+0.66)
Platinum
827.48
(+0.14)
Brent Crude
42.17
(-1.20)
Palladium
1967.50
(+0.38)
All Share
55531.05
(-1.19)
Top 40
51235.09
(-1.23)
Financial 15
10528.08
(-1.64)
Industrial 25
75515.64
(-1.81)
Resource 10
53219.66
(-0.20)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
I'm not really directly affected
18% - 2068 votes
I am taking a hit, but should be able to recover in the next year
23% - 2676 votes
My finances have been devastated
35% - 4040 votes
It's still too early to know what the full effect will be
25% - 2894 votes
Vote