The dollar weakened against the euro as the common currency climbed in a move dealers said may have been driven by anticipated currency demand arising from a Japanese bank's plans to purchase a German multi-billion dollar aviation finance business. Signs of economic stabilization in China and a strong start to US corporate earnings season boosted demand for riskier assets, leaving the dollar to turn in its worst weekly performance against the euro in four weeks.
The euro was 0.4% higher against the dollar at $1.1295, its highest since March 26. Speculators were buying the euro in response to reports on Mitsubishi UFJ Financial Group's planned purchase of the aviation financing business of Germany's DZ Bank, dealers said. The transaction was announced on March 1 and MUFG said it was expected to close after June. "The euro was well-supported in the Asian session on Japanese demand on the crosses but the euro has also looked quite 'cheap' in broader terms in recent weeks and still looks - in our opinion - a relative bargain around the 1.12 area," Shaun Osborne, chief FX strategist at Scotiabank in Toronto, said in a note.
Investors' appetite for riskier currencies got a boost after Chinese data showed exports rebounded last month, helping offset weaker imports, and reports of another reduction in Germany's growth forecasts, analysts said. Data from Europe was encouraging. Euro zone industrial output declined by less than expected in February.
US stocks climbed back to near record highs on Friday after the largest US bank, J.P Morgan Chase & Co, soothed worries that the first-quarter earnings season would pour cold water on Wall Street's big rally back from last year's slump. "It's a party-like atmosphere for markets. Good news from China and US earnings off to an auspicious start," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
"This has safe-havens on their back foot, that's why the dollar is underperforming," he said. Against the Japanese yen, which tends to benefit during geopolitical or financial stress as Japan is the world's biggest creditor nation, the dollar rose 0.35%. The Australian dollar, which is sensitive to shifts in risk sentiment, jumped 0.69%.
The British pound rallied as the immediate risks around Brexit receded after the postponement of the departure date and as the dollar suffered a broad selloff, although collapsing volatility signalled a reluctance to bet big. Sterling was up 0.13% at $1.3071. Turkey's lira was 0.5% weaker on the day after plumbing three-week lows, as investor expressed disappointment over the Turkish government's economic reform plan unveiled this week.
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