Euro hits 1-1/2 year high vs dollar after EU virus deal

NEW YORK: The euro on Tuesday climbed to its highest against the US dollar since January last year, after European Union countries struck an agreement on a massive stimulus plan to revive their coronavirus-battered economies.

An upturn in sentiment following the EU deal lifted commodity currencies, which tend to benefit in times of increased risk appetite. The Australian dollar rose to a 15-month high against the greenback, the New Zealand currency climbed to a six-month peak, and the Canadian dollar advanced to its strongest level in six weeks.

The EU deal - a compromise on concerns that thrifty northern states had about handouts for more their more profligate neighbors - was hailed as an important signal of unity by Europe's leaders and a foundation for economic recovery.

"There was all this anticipation for this rescue package, which was almost guaranteed that it will pass and when it did, it made everybody happy," said Juan Perez, currency trader at Tempus Inc in Washington.

"And this kind of symbolizes the fact that the European Union is going to work together to achieve fiscal integration for this rescue package. And it came to fruition," he added.

Encouraging results from several COVID-19 vaccine trials also boosted market sentiment and drove a rally in global stock markets.

In midday trading, the euro rose 0.6% to $1.1510, after earlier hitting $1.1516,, the highest level since Jan. 11, 2019 last year.

"I think with sentiment having swung to the euro's favor, that leaves the dollar vulnerable to selling on rallies, and the euro a buy on dips," said Joe Manimbo, senior market analyst, at Western Union Business Solutions in Washington.

"Above $1.15, that certainly could pave the way for $1.17 over the coming months," he added.

Against basket of major currencies, the dollar fell 0.5% was to 95.25, the lowest since early March.

ING analysts said they are looking for "more gains to $1.20 later this year" as dollar weakness kicks in because the recovery fund agreement is significant enough "not to prompt investors to exit their long euro positions," particularly against the dollar, where the outlook has darkened for the rest of the year.

The Australian dollar was last up 1.4% at US$0.7113, also lifted after the central bank offered few surprises in minutes from last month's meeting.

In a speech, Governor Philip Lowe said while he would prefer a cheaper Aussie dollar, its 27% recovery from March lows was supported by fundamentals.

The New Zealand dollar rose 0.8% to US$0.6626.

The Canadian dollar strengthened 0.7% to C$1.3443 per US dollar.

The dollar fell 0.5% versus the yen to 107.77 yen.