Dollar Close to Nine-Month High on US & EU Monetary Policy Divergence

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Dollar Close to Nine-Month High on US & EU Monetary Policy DivergenceThe dollar rallied close to its highest level in nine months versus the euro after the European Central Bank President Mario Draghi showed the bloc’s monetary stance will deviate from the policy adopted by the US for some time.

The dollar rose 0.2 percent to trade at $1.3362 per euro as of 11:52 a.m. in New York after earlier rising to $1.3333 on Wednesday, the highest level since November 8. The euro rose 0.2 percent to 136.39 yen, while the yen remained slightly unchanged at 102.09 per dollar, reported Bloomberg News.

“He’s mentioned a few times the divergence in monetary policies — in a way, he’s trying to send the euro lower, he just wants to remind the market fundamentals are not supporting the euro,” said Charles St-Arnaud, a senior economist at Nomura Securities International Inc in London, referring to Draghi “The initial jobless claims numbers were excellent. They’re back to pre-crisis levels.”

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The dollar surged against most peers after US unemployment claims fell. Jobless claims fell by 14,000 to 289,000 in the week through August 2, compared to 303,000 the previous week, reported the Labor Department.

Australia’s dollar plunged the steepest margin against the US dollar as traders speculated the Reserve Bank of Australia will reduce interest rates after the unemployment rate increased. The Aussie fell 0.8 percent to trade at 92.76 US cents after earlier declining 1 percent, the most since July 3. The currency touched 92.59 US cents, the weakest level since June 5.

Australia’s unemployment rate rose to 6.4 percent in July from June’s reading of 6 percent, reported the statistics bureau. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com