Euro peaks on view that stimulus may be curtailed

THE EURO hit a one-year high yesterday and German 10-year Bund yields continued to rise after doubling the previous day as bets grew that the European Central Bank (ECB) is readying to scale back its €2-trillion (R29tn) stimulus programme.

The bond market sell-off and the jump in the euro came as technology stocks dived after the latest global cyber attack sent European shares to a two-month low.

The euro was eyeing $1.14 (R14.78) and was at a seven-month high versus the pound after an upbeat ECB president, Mario Draghi, on Tuesday opened the door to changing the bank’s aggressive stimulus policy. The common currency is up almost 10% this year.

Wall Street, meanwhile, looked set to struggle again after the S&P 500 and Dow Jones indices took their biggest tumbles in over a month.

Nerves over the latest cyber attack, this time called Goldeneye, weighed on big technology names, including Apple, Google-parent Alphabet, Facebook and Microsoft, in pre-market trading.

In Asia overnight, MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.4% as it pulled back from a twoyear high hit on Monday.

Japan’s Nikkei ended down 0.5% as the yen, at 111.900, also took advantage of the dollar’s weakness. The banking and insurance sectors, however, outperformed on expectations of higher rates.

The yield on US Benchmark 10-year Treasury notes last stood at 2.22%, well up from Monday’s 2.14%.

The dollar index, which gauges the US currency against a basket of six major counterparts, edged down 0.2% to 96.227, below its previous session high of 97.447.

Sterling, which has come under pressure again from Britain’s recently volatile politics, also bounced, clawing above $1.28 to its highest since Prime Minister Theresa May lost her parliamentary majority on June 8. Conversely, it hit its weakest since November at 88.79 pence per euro.

Crude-oil futures gave back some of Tuesday’s near 2% gain made on the back of the weaker dollar and expectations that US crude inventories might decline for a third consecutive week.

Brent crude futures were down 0.2% at $46.55 per barrel. – Reuters