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EUR/USD up to 1.3885 as QE Bets Pared

The euro climbed against the dollar, reaching the strongest level in almost three weeks, amid speculation investors were reducing bets on the European Central Bank unveiling an asset-purchase plan to boost price growth.

The shared currency advanced yesterday as a report showed euro-region inflation accelerated and a Portuguese lawmaker said the nation will announce a bailout exit plan this week. The dollar was little changed against the yen before a report economists said will show U.S. initial jobless claims fell. New Zealand’s dollar gained for a third day after Chinese data showed manufacturing picked up in April. A gauge of expected currency swings fell to the lowest since 2007.

“Many investors were shorting the euro on anticipation of ECB stimulus,” said Neil Jones, the head of hedge-fund sales at Mizuho Bank Ltd. in London. “That’s looking very unlikely frankly at this time and the market is cutting euro shorts. Meanwhile, Mediterranean Europe is performing well. The move is down to sentiment shift.” A short position is a bet an asset will decline.

Bloomberg [1]

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