Euro rallies to six-month high as investors lose interest in the dollar
The euro hit a six-and-a-half month high and the yen reached a three-month peak against the dollar yesterday as investors dumped riskier assets and flocked to currencies seen as safe havens on fears about a slowdown in the Chinese and global economies.
The euro jumped to $1.1500, its highest level since February, in European trade. It last stood at $1.1480, up 0.8pc on the day.
The dollar weakened because experts believe the likelihood is diminishing of an interest rate rise by the US Federal Reserve next month on the back of the global volatility sparked by fears over the Chinese slowdown.
The dollar index, which measures its performance against a basket of six major currencies, fell 0.9pc to its lowest in two months.
But it's not just the value of the US dollar that's been hit.
The value of the Australian and Canadian dollars has plunged in recent months, which would make it more expensive for Irish emigrants in those countries to holiday at home. The growth and commodity-linked Australian dollar has slid to six-year lows.
John Moclair, head of retail treasury sales at Bank of Ireland, said as global commodities have collapsed, the value of the commodity-related currencies has weakened. He pointed out that the Australian and Canadian currencies are 15-20pc lower since mid-year.
"Markets are highly uncertain at present and participants are trying to figure out whether this is just a short term blip or the start of something more substantial," he said.
"The euro strengthened above a key point at 1.15pm against the dollar, which suggests the euro has a more to go against a range of currencies. The key thing in such volatile and uncertain markets is for people and businesses to make sure they are not overly exposed."
Meanwhile traders said while the weakness in the US dollar index reflected doubts whether the Federal Reserve will be able to hike rates next month, without clear signals from the US central bank so far, many commodity and emerging market currencies would continue to struggle against the greenback.
That gave credence to a view that while the dollar was likely to struggle against major and more liquid currencies, it would rise against those in emerging markets. (Additional reporting Reuters)