The euro held close to a three-year high against the dollar on Tuesday, as the common currency recovered from earlier losses tied to doubts that the European Central Bank would back away from its pledge to keep buying bonds at next week's meeting. Digital currencies tumbled, with bitcoin dropping as much as 18 percent to a four-week low near $11,000 after reports suggested it was still possible that South Korea could ban trading them, which intensified fears of a wider regulatory crackdown.
Sources close to the ECB told Reuters that the central bank was unlikely to tweak its policy message so soon, as rate setters need more time to assess the outlook for the economy and the euro. "For ECB policymakers, they are thinking 'We have to be careful to not feed into this run,'" said Dragah Maher, US head of FX strategy at HSBC Securities in New York.
The dollar gained against the euro on the Reuters report. The greenback's recovery was also stoked by anxiety over whether German Chancellor Angela Merkel would manage to form a "grand coalition" to govern. Members of the center-left Social Democrats (SPD) in one of Germany's regions voted against talks with Merkel's conservative Christian Democrats (CDU) on Monday, and fresh headlines on that development triggered a fall in the euro in early European trading on Tuesday.
The euro was up 0.06 percent at $1.2268. Its weakness against the dollar dissipated as Wall Street stocks turned lower on profit-taking that emerged after the Dow hit the 26,000 mark for the first time. The reversal on US stocks kindled safe haven demand for the yen and Swiss franc. The dollar was down 0.18 percent at 110.32 yen, while the greenback was down 0.45 percent at 0.9586 franc per dollar.
The euro's decline did not dent bullish sentiment for more gains in the coming months. Cryptocurrencies ethereum and ripple were down 19 percent and 29 percent, respectively. Most cryptocurrencies posted double digit losses, according to Coinmarketcap.
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