Dollar hits third straight 2018 high as divergence re-emerges

A relatively upbeat Mario Draghi did little to dent the dollar’s rip higher as investors re-focused on the divergent US and euro-area economies.

The greenback set a 2018 high for a third straight day even as the European Central Bank chief said risks to euro-area growth remain “ broadly balanced,” as he kept rates at zero. His comments came after a slate of dismal European figures, including a Purchasing Managers’ Index report that showed euro-area growth slowed.

That’s in contrast to the economic picture in America, according to Citigroup, given the strength of US leading indicators and the Federal Reserve’s commitment to hiking rates. While ECB officials were “as optimistic as they could be,” that wasn’t enough to crimp the greenback’s strength, said Calvin Tse, Citigroup’s North American head of G-10 FX strategy.

“Investors have been wanting to buy the dollar on the back of data divergence,” Tse said. “The better investment opportunities — high growth, high yields, a deep pool of liquid safe assets — in most scenarios, you want to be buying the US dollar.”

The dollar rose against most of its Group-of-10 peers Friday, with the Bloomberg Dollar Spot Index climbing 0.1% to the strongest level since June 2017. The euro fell 0.1% to $1.1366, not far above its year-to-date low.

Investors will get their next update on the state of the US economy with Friday’s third-quarter gross domestic product reading. Growth likely cooled to a 3.3% annual rate of expansion, according to a Bloomberg survey, from 4.2% in the prior period, which was the quickest since 2014.

� L.P

Source: moneyweb.co.za