The dollar suffered fresh losses on Monday, while Asian markets mostly rose as investors await a Federal Reserve policy meeting and the release of big-name earnings results.
But uncertainty surrounding Donald Trump’s presidency continues to drag on sentiment, with Wall Street’s three main indexes ending last week on a negative note.
The single currency extended last week’s rally against the greenback after European Central Bank boss Mario Draghi said policymakers would address its vast stimulus programme by the autumn, fuelling speculation they would start winding it in.
In afternoon trade Monday the euro bought $1.1668, around two-year highs, with analysts predicting it could break above the $1.1714 mark set in mid-2015.
The dollar was also well down against the yen and pound. The unit has struggled as Trump’s travails — from a probe into his election campaign’s links to Russia to failure to push through health care reforms — dampen expectations he will be able to pass his much-vaunted economic agenda.
“Factoring in the expanding US political sinkhole, which is weighing on broader (dollar) sentiment, it’s unlikely the market has run out of steam,” Stephen Innes, head of Asia-Pacific trading at OANDA, said in a note.
Traders will be watching the Fed’s latest policy meeting, which ends on Wednesday, hoping for some guidance on its plans for raising interest rates. Expectations for further increases have been tempered in recent weeks as inflation remains tepid and Trump’s woes grow.
On equities markets, Tokyo’s Nikkei index ended down 0.6 percent as exporters were hit by the strong yen, while Sydney also shed 0.6 percent and Singapore was 0.1 percent off.
However, other markets managed to recover early losses, with Seoul 0.1 percent up, while Taipei and Wellington were each 0.2 percent higher.
There were also gains in Bangkok and Jakarta.
Hong Kong was up 0.4 percent in the afternoon — having risen for nine of the previous ten trading days. Shanghai finished 0.4 percent higher.
Michael McCarthy, chief market strategist at CMC Markets, said: “Japan and the US releases could dominate market thinking.
“These releases will occur alongside the busiest week of the US corporate reporting season so far and an interest rate decision from the US Federal Reserve.
“This snapshot of two major economies leads into (factory activity) data from China the following week. The outlook for markets may change considerably, especially if recent US economic weakness persists.”
In early European trade London lost 0.2 percent, Franfurt shed 0.1 percent and Paris rose 0.3 percent.
– Key figures around 0720 GMT –
Tokyo – Nikkei 225: DOWN 0.6 percent at 19,975.67 (close)
Hong Kong – Hang Seng: UP 0.4 percent at 26,816.00
Shanghai – Composite: UP 0.4 percent at 3,250.60 (close)
London – FTSE 100: DOWN 0.2 percent at 7,438.04
Euro/dollar: UP at $1.1668 from $1.1666 at 2030 GMT Friday
Pound/dollar: UP at $1.3000 from $1.2994
Dollar/yen: DOWN at 111.08 yen from 111.13 yen
Oil – West Texas Intermediate: UP one cent at $45.78 per barrel
Oil – Brent North Sea: UP five cents at $48.11
New York – DOW: DOWN 0.3 percent at 21,580.07 (close)