Euro Slips, Dollar Rises With Central Banks in Focus; Yuan Drops

By Reuters
December 9, 2021 Updated: December 9, 2021

London—The euro, pound, and dollar stabilised on Thursday as China’s yuan fell from a 3–1/2-year high and was set for its biggest drop in more than four months.

With the U.S. Federal Reserve, European Central Bank, and Bank of England among those meeting to discuss monetary policy next week, investors will be keenly watching for forward guidance, especially from the Fed, where some analysts expect a faster unwinding of pandemic-era stimulus plans.

The euro had edged 0.25 percent lower to $1.1313 by 1240 GMT, still close to one-week high touched the previous day after a Reuters report that the ECB will debate policy tweaks at next week’s meeting.

The U.S. dollar, against a basket of currencies, nudged 0.2 percent higher to 96.145, some way from the 16 month high of 96.938 touched in November.

Sterling was 0.1 percent lower at $1.3185, after touching new 2021 lows the previous day, as British Prime Minister Boris Johnson imposed new COVID-19 restrictions in England.

“The modest tightening of restrictions in England, while inconvenient still pales into insignificance when compared to the measures being implemented across Europe,” said Michael Hewson, chief market analyst at CMC Markets UK.

Expectations of an unwinding of U.S. monetary stimulus measures had helped the dollar index rise in November, before Omicron’s emergence sent it lower.

The Fed is expected to announce it will accelerate tapering of its bond-buying programme at its meeting next week.

One of the key winners from the improvement in Omicron-related sentiment this week has been the Norwegian crown, which jumped to an almost three-week high on Wednesday.

It was last down 1 percent on the day versus the greenback at 8.97 crowns per dollar as it was unclear whether the central bank will move to raise interest rates on its Dec. 16 meeting, as announced in early November.

“We may see some pullback after yesterday’s big move, but there is likely some more room for the NOK to appreciate into the NB meeting next week,” ING told clients.

Bitcoin slipped 2.7 percent to just below $49,277 as it continues to trade in a narrow range after a sharp weekend plunge.

By Joice Alves