The euro hit a three-month high against the dollar on Thursday, lifted by another lurch higher in euro zone government bond yields that again kept global stock markets in check.
Investors digested figures from the previous day that showed relatively strong euro zone economic growth in the first quarter, contrasting with disappointingly weak U.S. retail sales in April.
The euro shot above $1.14, bringing its gains against the U.S. currency in the last month to nearly 9 percent as the difference between benchmark U.S. and euro zone 10-year yields shrinks from the euro-lifetime high touched in March.
European stock markets clawed back opening losses on Thursday but struggled to make much headway, with investors worried about volatility and the tightening of financial conditions resulting from the spike in yields.
Asian stocks were broadly flat but Japan’s Nikkei 225 index fell 1 percent. U.S. futures pointed to a positive opening on Wall Street thanks to the dollar’s slide to a four-month low.
“The euro rally has continued today despite more stable German bond markets, suggesting the move is being driven by a weaker dollar,” Barclays wrote in a note on Thursday.
“European equities are broadly stable but the downtrend that started in mid-April remains in place.”
The euro was up two-thirds of one percent on the day at $1.1430, as the U.S.-German 10-year yield spread narrowed to a three-month low of 151 basis points. In mid-March, the dollar’s yield advantage over the euro was 193 basis points.