Euro Rallies to a Two-Week High, Reversing Earlier Declines

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EUR/USD Ichimoku Kinko Hyo Analysis - Mar. 26, 2014

Euro Rallies to a Two-Week High, Reversing Earlier DeclinesThe euro advanced its highest level in more than two weeks versus the dollar as investors maintained their optimism that the Ukraine-Russia conflict would not morph into a war.

The euro gained against the yen as the market bet that the Bank of Japan will enhance its stimulus to offset the impact of planned tax increase. The Australian dollar also advanced against several major currencies.

The 18-nation euro nearly dropped to a two-week low against the dollar on Monday after data indicated German manufacturing has declined. A measure of the currency’s volatility hit almost a two-year low.

“The bid interest in the euro-dollar remains, with it looking to close above $1.3800 today,” Douglas Borthwick, the New York-based head of foreign exchange department at Chapdelaine & Co. in told Bloomberg. “The market is getting used to the idea that announced sanctions are political theater, and without much bite. The prospect of Russia acquiring Crimea without bloodshed is gaining momentum.”

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The euro surged to a high of 0.6 percent to $1.3876, its highest intraday advance since March 6. However, it finally settled at $1.3842 at late afternoon trade in New York, up 0.4 percent. It also gained 0.4 percent to trade at 141.53 yen.

However, the yen remained resilient against the dollar at 102.25 a dollar.

Deutsche Bank’s Currency Volatility Index, which is calculated using three-month implied volatility of nine major pair of currencies, fell 0.16 percentage points to 6.97 percent, its lowest figure since Dec. 17, 2012. Last year, the mean has been 8.58 percent.

The euro had earlier fell after research firm Markit Economics announced that its preliminary measure of German manufacturing fell to 53.8 in March, from 54.8 the previous month.

To contact the reporter of this story; Yashu Gola at yashu@forexminute.com