Euro hits year-high against dollar; US stocks bounce
A woman walks past an exchange office in Moscow, on December 3, 2014. AFP
NEW YORK, United States — The euro extended its run higher against the dollar Wednesday, hitting a one-year high, while tech and bank stocks helped Wall Street reverse a sell-off in the prior session.
The euro rose close to the key $1.14 level, reaching $1.1391 at one point, its highest level in a year.
Analysts said the foreign exchange market was continuing to weigh upbeat comments Tuesday from European Central Bank chief Mario Draghi that were seen as more hawkish than expected.
“The euro awoke to one-year highs after the head of the ECB hinted at an eventual reduction in monetary stimulus as the bloc’s economy continues to gain steam,” said Western Union Business Solutions analyst Joe Manimbo.
“The Federal Reserve stands to lose its ‘only game in town’ status, which has long been supportive of the dollar, as other central banks contemplate a reduction in stimulus.”
Draghi on Tuesday said the EU was enjoying a newfound confidence that could unlock demand and investment. While he cautioned against winding down the bank’s easy money policy, analysts said the central bank chief was more hawkish than expected.
But some US analysts pointed to comments from European officials suggesting investors had overreacted on Tuesday to Draghi’s comments.
“As long as there is stimulus somewhere, it is supportive of equities,” said Chris Low, chief economist of FTN Financial.
US stocks bounce
Equity markets in Paris and Frankfurt fell slightly, but the US scored big gains, with the Nasdaq leading the way, rising 1.4 percent.
Bank of American and JPMorgan Chase each bounced two percent or more ahead of the Fed’s announcement approving dividends and share buyback plans following the stress tests.
In the first part of the results, the Fed last week said all 34 banks it examined could withstand a severe recession.
Technology shares, which fell hard on Tuesday, finished firmly higher. Apple rose 1.5 percent, Facebook 1.8 percent and Google-parent Alphabet 1.4 percent.
Nestle rose 1.1 percent after the company said it will buy back 20 billion Swiss francs worth of stock, only days after an activist fund took a stake in the food conglomerate, demanding more returns for shareholders.
“This is an additional step towards speeding up the creation of value for shareholders,” said Andreas von Arx, an analyst at Baader Helvea. CBB
