The euro rose to parity versus the Swiss franc for the first time since July as improved risk appetite and hawkish signals from the European Central Bank helped boost demand for the common currency.
(Bloomberg) — The euro rose to parity versus the Swiss franc for the first time since July as improved risk appetite and hawkish signals from the European Central Bank helped boost demand for the common currency.
The euro-franc pair climbed as much as 1.2% to 1.00225, the highest since July 5. The pair may reach 1.0265 in the coming two months, according to Wells Fargo strategist Erik Nelson, who cited an improved economic outlook in the euro area as well as central bank policies. The euro was among the the best Group-of-10 currencies versus the greenback, advancing as much as 0.4% to $1.0776, the highest since May.
The warmer weather gave investors confidence to bet on the euro as ECB officials indicated more rate hikes are needed for inflation to return to the target. ECB Governing Council member Olli Rehn said Wednesday rates “still have to rise significantly” to be sufficiently restrictive.
Read more: Wall Street Goes All In on Euro to Keep Charging Higher
The euro also benefited from a pickup in risk sentiment — that weighed on havens like the franc — amid prospects of China’s reopening and a slowdown in the Federal Reserve’s aggressive policy path. Stocks rose on Wednesday and Treasury yields fell ahead of key data that may show further easing in the pace of US inflation, bolstering the outlook for scaling back Fed hikes.
Short-covering and strong option demand aided the euro rise on Wednesday.
–With assistance from Robert Fullem.
(Updates market pricing in second paragraph, short-covering in last.)
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