Euro off four-month high versus dollar

The euro dropped back from Friday’s near four-month high, but talk of Federal Reserve quantitative easing later in the week limited losses.

The US central bank is holding a policy meeting on Thursday and expectations are high that the ensuing announcement will reveal that it will inject further stimulus in order to support the flagging economy. Injecting fresh stimulus into the economy would see the dollar fall in value and investors would turn to other currencies to seek returns.

Even though the euro fell slightly from the end of last week, it still hovered close to the high hit on Friday, after disappointing jobs data from the US saw it climb to its highest point since the end of May and led to widespread speculation of the US central bank kicking off a further wave of quantitative easing.

Toronto-based Scotiabank’s chief currency strategist Camilla Sutton said that risks loom large this week, with Thursday’s Federal Reserve meeting likely to be key for the euro. The central bank is set to release a policy statement after its meeting.

The common currency slipped by 0.1 per cent to $1.2795 today, but was not far from Friday’s high of $1.2817, its highest point in almost four months.