Forex – Euro Eases after Rally, Dollar Pushes Higher

Investing.com – The euro eased on Wednesday after a rally spurred by expectations that the European Central Bank will start to wind down its stimulus program later this year and the dollar regained ground against a currency basket.

slid 0.16% to 1.2038 by 02:48 AM ET (07:48 AM GMT). The single currency hit a four-month high of 1.2080 on Tuesday, putting it within striking distance of a September peak of 1.2092, its strongest level since early 2015.

The euro was boosted after data showing that the euro area manufacturing sector expanded at a record pace in December bolstered expectations that the ECB will start to scale back its asset purchase program later this year.

Expectations for tighter monetary policy in other countries, which would lessen the divergence between the Federal Reserve and other central banks, weighed on the dollar, sending it to more than three month lows against a basket of the other major currencies.

The , which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.13% to 91.68 from Tuesday’s lows of 91.47.

Market watchers were looking ahead to the minutes of the Fed’s December meeting, where its raised interest rates, which were due to be released later on Wednesday. Two policymakers voted against the rate hike amid doubts inflation would accelerate as hoped.

Investors were also looking ahead to Friday’s U.S. job figures for December.

The dollar inched higher against the yen, with edging up 0.08% to 112.37, pulling up from Tuesday’s two-week lows of 112.04.

Sterling was at three month highs against the greenback, with at 1.3598.