The rise of the euro has continued even as leaders in Europe are set to discuss how to deal with the debt crisis affecting the region. The euro continued to advance against the yen for the sixth day in a row follow reports that the governing council of the European Central may opt to set yield limits on the debt of each country during its next meeting.
The dollar also hit its highest level in five weeks against the yen prior to the release of the minutes from the recent meeting of the Federal Reserve. On the other hand the New Zealand dollar remained low following losses in the past five days.
According to Emma Lawson of the National Australia Bank (ASX:NAB) the euro may be experiencing some positive news in the next few months and may even reach $1.33 at the end of the year. The outlook for the euro will remain positive once the reports on the limitations in Europe are confirmed.
A two percent increase was noted for the euro at the end of last week while the dollar recently reached its highest level against the yen since July 12. The unconfirmed reports hinted that the capability of the ECB in printing money will give it limitless funds to buy bonds from its members and prevent interests from increasing too much due to speculations.
Prime Minister Jean-Claude Juncker is expected to discuss the request of Prime Minister Antonis Samaras of Greece to extend the fiscal adjustment program of the country during his Athens visit on August 22. Juncker is the head of the group of finance ministers in the euro area. Samaras will travel to Berlin on August 24 and Paris on August 25. The visit follows a meeting between President Francois Hollande of France and Chancellor Angela Merkel of Germany on August 23.
Commodity Futures Trading Commission figures show that the US dollar may gain against the euro. The net shorts or the difference in the number of large scale speculators on a decrease in the value of the euro was at 137,810 by August 14, which is higher compared to the previous week which was at 131,711.
The past year saw the euro decline by 9.1 percent as compared to the 7.6 percent increase experienced by the dollar and the 1.3 percent increase by the yen. The minutes of the two-day Fed meeting is set to be released on August 22. The meeting saw officials decide against increasing monetary stimulus, which would result to a decline in the US dollar.
Policy makers have indicated that the Fed may continue to limit the key rate at 0.25 percent until 2014. This regulation of the key rate was started in 2008. According to Dana Saporta and Neal Soss of the Credit Suisse Group AG, the probability that another set of asset purchases may be announced by US Central Bank has gone down. Around $2.3 million of Treasury and mortgage debt has been purchased by the Fed since 2008.
The two economists have indicated that the next policy may still focus on additional accommodations although the decision itself may remain uncertain.