Dollar Rises Versus Euro, Oil Drops Before ECB, OPEC Meetings
The dollar hit its strongest since mid-March against its peers at the start of a week likely to highlight the divergent outlooks for U.S. and euro zone interest rates, while oil fell with OPEC ministers expected to keep the pumps on.
The euro EUR= fell against the dollar, before a European Central Bank meeting on Thursday that is expected to unveil fresh monetary easing measures.
The U.S. Federal Reserve,, by contrast, is expected to raise interest rates later this month for the first time in nearly a decade.
European shares opened lower, following falls in Asia, with investors nervous before the Thursday’s meeting at which the ECB may extend its bond-buying program and cut its already negative deposit rate. Shares later picked up.
“The market expects a broadening of the purchase program as well as a cut in the deposit rate, but expectations have gone quite far since we had rumors last week of a possible two-tier deposit rate cut,” said Norbert Wuthe, rate strategist at Bayerische Landesbank.
On Friday, ministers of the Organization of the Petroleum Exporting Countries meet in Vienna and are not expected to cut production.
The pan-European FTSEurofirst 300 index .FTEU3 was last up 0.2 percent. Worries over China, which hit Asian shares, also weighed on early trade in Europe.
Chinese stocks, which fell more than 5 percent on Friday, were at one point down a further 3 percent on Monday before closing marginally up on the day. The CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen and the Shanghai Composite .SSEC both ended up 0.3 percent.
China’s currency was also in the spotlight, with the yuan CNH=D3 jumping in offshore trade on suspected intervention by Beijing hours before the International Monetary Fund is expected to grant it reserve status. It last traded at 6.431 to the dollar, up 0.2 percent on the day.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.8 percent, and was on course to book a loss of about 2.8 percent for the month of November, after making its first gains in six months in October.
Tokyo’s Nikkei .N225 stocks index fell 0.7 percent on concern over China and after Japanese industrial output data undershot forecasts.
The dollar index .DXY, which measures the greenback against a basket of currencies, touched its highest since mid-March and was on track for a 3 percent gain on the month.
The euro EUR= fell 0.2 percent to $1.0566 while the yen JPY= lost 0.2 percent to 123.05 per dollar. Sterling GBP=, meanwhile, hit a seven-month low just below $1.50.
“We are probably with the consensus, the Fed is going to tighten, the ECB is going to ease, so the euro will go lower to about 1.05 and then that will be your lot (for the year),” said Sanjiv Shah, Chief Investment Officer with Sun Global in London.
Brent crude LCOc1 was last down 22 cents at $44.64 per barrel and on track for a 10 percent fall this month.
While most analysts do not expect OPEC to cut output, they are mindful that Saudi Arabia could be inching towards the idea of working on price support measures with other oil producers.
Gold XAU=, which has fallen lately on the prospect of higher U.S. interest rates, was on track for its worst month in 2 1/2 years. It last traded down 0.1 percent at $1,057 an ounce.