© Reuters. The euro falls below 1.08 dollars due to risk aversion
Frankfurt (Germany), Feb 6 (.).- The euro depreciated this Friday below 1.08 dollars, to the minimum since the beginning of January, due to risk aversion in the face of tensions between the US and China over the demolition of of a Chinese globe and the interest rate differential.
The euro was trading around 4:00 p.m. GMT at $1.0728, compared with $1.0866 in the final hours of European currency market trading the previous day.
The European Central Bank (ECB) set the reference exchange rate for the euro at $1.0776.
In addition, some figures for the euro area economy disappointed.
The order book of the German manufacturing industry rose 3.2% last December compared to the previous month and contracted 10.1% year-on-year.
Retail sales fell in the euro area in January by 2.7% from the previous month and by 2.8% year-on-year.
This week “attention will continue to be focused on rate differentials,” comment Monex Europe analysts.
The United States Federal Reserve (Fed) raised its rates moderately last week, by a quarter of a point, to a range of between 4.5% and 4.75%, and its president, Jerome Powell, said that for Bringing inflation to 2% still has adjustments ahead, although they don’t know how much.
Inflation falls but the US labor market remains very strong and creates more employment than expected without wage demands being very high, a situation that has surprised the central bank, while the service sector is also recovering.
“The fall in the dollar is unlikely to be significant as long as the US labor market remains historically tight,” adds Monex Europe.
The dollar appreciates on expectations that the Fed will raise its rates further in the coming months, which reduces the chances of a lower price of money at the end of the year.
The ECB raised its rates by half a point last Thursday, to 3%, and said it intends to increase them by another 50 basis points in March.
Investors were convinced last week, when the Fed, ECB and Bank of England met, that the peak of monetary policy is near and their attention turned to easing in the medium term, analysts at Unicredit (BIT:) in a comment on the markets.
“Central banks were unsuccessful in changing this attitude, even if they raised interest rates in line with market expectations and signaled that more is in store,” adds UniCredit.
The single currency was exchanged in a fluctuation band between 1.0727 and 1.0798 dollars.