Dollar index wallows at three-year lows

Euro buoyed by investor hopes ECB could trim monetary stimulus

The dollar languished at threeyear lows against a basket of currencies on Monday, while the euro stood tall on investors’ hopes that European Central Bank (ECB) policymakers could be poised to further trim their monetary stimulus.

The dollar index, which tracks the greenback against a basket of currencies, slipped 0.2 percent to 90.807 after falling as far as 90.773 earlier in the session, its lowest point since January 2015.

The euro was up 0.1 percent at $1.2206, in sight of a peak of $1.2218 on Friday, its highest level since December 2014, leaving some strategists to ponder when its next top might be.

“I think the strength of the euro is overdone,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

“The strength of the euro itself will delay the ECB’s normalization. The ECB is conducting verbal tightening, so they don’t need to move on interest rates.”

Against the yen, the dollar slipped to its lowest levels since mid-September, as comments from Japan’s central bank governor highlighted Japan’s economic recovery.

While Bank of Japan (BOJ) Governor Haruhiko Kuroda reiterated the central bank’s resolve to maintain its massive stimulus program until 2 percent inflation is achieved stably, he also said the country’s economy is expected to continue moderately expanding.

Core consumer prices are rising around 1 percent, Kuroda said in a speech to BOJ regional branch managers. This was a slight change from his previous speech to branch managers, when he said core consumer prices were around zero.

The dollar was 0.3 percent lower at 110.73 yen, after earlier falling as far as 110.63.

“We continue to see dollaryen sellers, to be honest,” said Bart Wakabayashi, branch manager at State Street Bank in Tokyo.

“Let’s see if we start to see some rumblings from Japanese officials, about yen strength,” he said. “We might see some comments to calm market expectations of yen strength.”

Sterling edged up 0.1 percent to $1.3739, probing its highest levels against the dollar since the Brexit vote in June 2016.