The euro hit a 22-month low against the dollar on Thursday on the prospect of diverging monetary policy between the Federal Reserve and the European Central Bank as rate differentials swing decisively in the greenback’s favor.
The common currency fell to $1.2730 on trading platform EBS, its lowest since November 2012, and was down 0.3 percent on the day. The dollar index hit a new four-year high. The latest drop came as yield differentials between US 10-year Treasuries and their German counterparts traded near 15-year highs, driving more investors to buy the dollar.
A recent batch of economic data has also highlighted the diverging economic outlook for the euro zone and the United States. While German business sentiment fell again in September to its lowest level in nearly 1-1/2 years, sales of new U.S. single-family homes surged in August to their highest level in more than six years.