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The euro sank below $1.13 in morning trade in
Europe but it recovered almost half a cent around midday London
time after a report said European officials would make a
compromise proposal to give Athens another six months to
negotiate.
The dollar hit a one-month high against the yen and its
resurgence was the dominant note after a quieter week of trading
and overnight gains for commodity price-dependent currencies
like the Australian dollar and Norwegian crown.
"You're just seeing a bit of dollar strength across the board,"
said Peter Kinsella, a strategist with Commerzbank in London.
"There’s no immediate catalyst for further dollar strength at
the moment, although I’m sure we’ll see it, and you’ve got
everybody waiting for Greece as of tomorrow with the Eurogroup
meeting."
The dollar was up around a quarter of a percent against a basket
of currencies by 1230 GMT and by roughly the same amount
against the euro at $1.1296. Against the yen it gained 0.6
percent to 119.39 yen.
U.S. Treasury yields, whose purported rise is a key argument for
the dollar's strength since the middle of last year, have jumped
20 basis points since early on Friday.
There has been a broadly steady tone to the dollar, yen and euro
for most of the two weeks since the European Central Bank
announced a quantitative easing scheme to reflate an
increasingly moribund euro zone economy.
However, fears that Greece's new government could be inching its
way out of the single currency in a standoff with Germany have
begun to weigh on the euro this week.
"At some point this week, we’re going to see the single currency
break from the relative resilience we’ve seen so far in relation
to events in Greece," said London retail broker FxPro's chief
economist, Simon Smith.
The main event overnight was a fall in Chinese inflation to a
five-year low, providing support for expectations of further
policy easing by Beijing to protect growth.
That pulled the Shanghai stock exchange higher, generating a 0.3
percent gain for the Aussie, which is highly geared to the
outlook for its main Asian trading partner. That move, and
similar shifts in the New Zealand dollar and Norwegian crown,
had reversed by midday in London.
(Editing by Gareth Jones)
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