Euro races past the $1.18 line as inflows intensify

European Stock Markets

The euro popped above the 1.18 line for the first time in three weeks on Wednesday as investors resumed buying European equities while the dollar found itself on the back foot for a second day as U.S. bond yields decline. 

With the euro zone’s annual economic growth rate outstripping that of the United states in the third quarter, led by Germany, markets are increasingly optimistic about the region’s outlook.

The single currency punched through a key technical level of $1.1734 on Tuesday and extended gains on Wednesday to rise 0.2 percent at $1.1824 against the dollar.

Over the last few sessions, unhedged purchases of European stocks have picked up noticeably after declining in October.

Despite the rise, some investors remain sceptical about the outlook for the currency, with a Bank of America Merrill Lynch fund manager survey for November pointing out that the percentage of investors saying the euro is overvalued has grown to 12 percent from 4 percent in the previous month.

Elsewhere, the Australian dollar was the big mover of the Asian session, skidding 0.6 percent against its U.S. counterpart to $0.7587, brushing its lowest levels since July.

Data showed Australian wages rose only 0.5 percent in the third quarter and 2.0 percent for the year, falling short of 0.7 percent and 2.2 percent respectively and challenging the Reserve Bank of 

Australia’s view that wages would pick up.

The dollar fell for a second session as falling U.S. stocks and declining U.S. yields weighed on the greenback.

The dollar index fell 0.3 percent to 93.558 on Wednesday as investors awaited U.S. consumer inflation data for October, due later on Wednesday, that is expected to show a marginal increase in consumer prices.