EUR/USD Trades at 2 Year Low Due to Strong US Economy

The dollar appreciated to the strongest level in two years versus the euro as reports this week are projected to show U.S. consumer confidence and retail sales improved after payrolls growth topped all forecasts.

A gauge of the dollar traded near its highest close in more than five years after Chinese imports unexpectedly fell in November, boosting demand for the U.S. currency where growth is beating forecasts. The New Zealand dollar slid to the weakest level in more than two years. An index of emerging-market currencies slid to the lowest in a decade, with South Africa’s rand falling to a six-year low and Russia’s ruble extending its drop versus the greenback this year to 39 percent.

“We’re seeing good fundamental support for the dollar move,” said John Hardy, the head of foreign-exchange strategy at Saxo Bank A/S in Hellerup, Denmark. “It’s not just about the currency moving higher; we’re also seeing the market drastically marching forward the first anticipated Federal Reserve rate hike. Any currency where the economy is leveraged to oil is still weak. U.S. rates heading higher is a very strong negative for emerging markets.”

The dollar gained 0.1 percent to $1.2274 per euro at 8:43 a.m. New York time after reaching $1.2247, the strongest since August 2012. It gained 1.4 percent last week. The U.S. currency fell 0.5 percent to 120.82 yen. The yen strengthened 0.6 percent to 148.28 per euro.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 trading partners, fell 0.1 percent to 1,121.10. It climbed as high as 1,124.19 and is set for the highest close since March 2009.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza