The dollar fell against the euro while gaining against the Japanese yen as investors reacted to comments by a Chinese official hinting at the possibility of another stimulus package.
Chinese Premier Li Keqiang, in a bid to pacify foreign investors, said that the Communist Party is ready to prop up the sluggish economy as it had the required policies in place and that it would continue with its investment in infrastructure.
This saw the euro, which is a favorite for investors in times of riskier times, inch higher against the greenback. The currency was last trading 0.04 percent higher at $1.3746, reversing its earlier losses that saw it touch a three-week low.
“There has been a risk-on move in the currency market,” said Shahab Jalinoos, a Stamford, Connecticut-based currency strategist at UBS.
The dollar was trading 0.71 percent higher versus the yen at 102.9. The U.S. dollar Index, which tracks the dollar against a basket of six major peers, last closed 0.13 percent higher at 80.217.
Traders revealed that they were sceptical that the European Central Bank will roll out additional monetary easing in its April 3rd meeting, notwithstanding the comments from ECB policymakers last Tuesday that subtly hinted at plans to roll out monetary easing to combat deflation.
The statements pushed down the euro this week, as the aim of the monetary easing would be to weaken the currency and push down deflation.
“I have a hard time believing many are looking for a rate cut next week,” David Gilmore, an Essex, Connecticut-based partner with Foreign Exchange Analytics told Reuters.
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