LONDON: The European single currency hit another four-month high on Monday, as poor US manufacturing data stoked expectations of more quantitative easing from the Federal Reserve, traders said.
In afternoon deals, the euro rebounded to $1.3172 -- hitting a pinnacle last seen on May 4. That compared with $1.3127 late in New York on Friday.
The dollar sank following a second straight monthly decline in the Fed's Empire State manufacturing index for the New York region in September.
"Terrible US data can be perceived as good news by the financial markets if it extends the prospect of more QE from the Federal Reserve," said research director Kathleen Brooks at trading website Forex.com.
"This was in evidence after the release of terrible Empire manufacturing index for September.
"The index plunged to its lowest level for two years and was dragged lower by new orders, employment levels and shipments of orders suggesting that export demand is weak."
Global markets and the euro had rallied last week after the Fed said it would embark upon an open-ended programme of purchasing $40-billion per month in mortgage-backed bonds, known as quantitative easing (QE3).
The US central bank added that it would continue with the scheme until it saw substantial improvement in the jobs market.
Analysts said the euro had been buoyed by a flight away from the dollar on expectations of higher US inflation caused by the added US stimulus, and by receding worries over the eurozone debt crisis.
Copyright AFP (Agence France-Presse), 2012
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