EUR/USD down to 1.32 on Policy Divergence

The dollar rose to the highest in almost a year against the euro amid speculation the Federal Reserve will raise interest rates next year, while the European Central Bank signaled additional measures to support growth.

The U.S. currency rose to the highest since January against the yen before reports this week that economists said will show new home sales rebounded and durable goods orders climbed. The euro fell versus most major peers before German data forecast to show business confidence dropped and after ECB President Mario Draghi said inflation expectations have declined. New Zealand’s dollar fell to a six-month low as demand for higher-yielding assets waned before Russia and Ukraine meet for peace talks.

“There’s a significant divergence in the message coming out of the Fed and the message coming out of the ECB,” said Callum Henderson, global head of foreign-exchange research at Standard Chartered Plc in Singapore. “That is a major supportive factor for the dollar against G-10, particularly against the euro and the yen,” Henderson said in reference to Group of 10 currencies.


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