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Last updated: January 10, 2013 7:22 pm
The euro rose above $1.32 against the dollar after the European Central Bank kept interest rates on hold and signalled a more positive outlook for the eurozone.
The single currency gained 1.2 per cent to touch $1.3224 after Mario Draghi, ECB president, forecast that the eurozone would return to growth this year and said the decision to keep the eurozone’s main refinancing rate steady at 0.75 per cent had been unanimous.
While the ECB had not been expected to lower rates, investors and analysts had focused on the policy statement from the ECB for indications of a cut.
“The knee-jerk move higher seems consistent with the view that part of the market was betting on the ECB cutting rates and this was weighing on the euro,” said Valentin Marinov, foreign currency strategist at Citigroup.
Analysts and investors reduced their expectations of future rate cuts in the wake of the ECB’s decision.
“The bar to another rate cut is higher than seemed to be the case last month,” said Marc Chandler, foreign exchange strategist at Brown Brothers Harriman.
The euro had received a boost after successful bond auctions in Spain and Italy, with both governments attracting lower borrowing costs for their short-term debt than at previous auctions.
The single currency’s gains came amid a wider sell-off in the US dollar as sentiment on the global economy improved.
The Australian dollar rallied along with most Asian currencies against the US dollar after strong trade data from China improved the region’s mood. The Aussie rose 0.7 per cent to $1.0587 against the dollar after Chinese exports in December beat expectations.
The pound rose 0.6 per cent against the dollar to $1.6127 after the Bank of England kept interest rates on hold and announced no further monetary easing plans, as expected.
The Japanese yen fell against other leading currencies after Shinzo Abe, Japan’s prime minister, reiterated his call for the Bank of Japan to implement a higher inflation target that would aid yen weakness.
The dollar rose 0.4 per cent to Y88.34, while the euro gained 1.5 per cent to Y116.63.
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