The euro fell from its recent highs on Monday after a eurozone official warned the currency may be too strong, sparking concerns it could hamper the region’s economic recovery.
The euro dipped against the dollar, the pound and the yen after Pierre Moscovici, France’s finance minister, said at the weekend the single currency was stable and strong – “perhaps even too strong in certain respects”.
Concerns over political instability in Spain were also weighing on the single currency, as Spain’s borrowing costs rose following allegations of corruption in the current government.
Last week, the euro touched a 15-month high against the dollar, rising above $1.37 for the first time since November 2011 as investors returned to the eurozone on optimism the crisis has abated.
On Monday, however, the euro fell 0.3 per cent against the dollar to $1.3591 and 0.5 per cent against sterling to ÂŁ0.8650. The single currency also dipped 0.2 per cent against the yen to Y126.06.
The dip in the euro came as investors looked ahead to the European Central Bank’s monthly meeting on Thursday, with Mario Draghi, ECB president, expected to face questioning on how the central bank viewed the recent sharp gains in the single currency.
“The longer-term risk to the euro, in our view, is that peripheral yields undergo a renewed rise, challenging these economies and weighing on growth,” said analysts at Morgan Stanley.
Others raised doubts over whether the ECB would comment specifically on the level of the euro.
“There was some moderate selling of euro crosses overnight on fears that ECB President Draghi may sound uncomfortable with the euro’s strength at the upcoming ECB policy meeting on Thursday. We’re not entirely convinced, given the ECB’s historical reluctance to comment on exchange rate levels,” noted analysts at UBS.
The New Zealand dollar was stronger against the US currency even as New Zealand’s prime minister warned that the country’s currency was too strong against its US counterpart. The so-called Kiwi traded at its strongest levels since 2011, hitting $0.8493 against the US dollar.
The Australian dollar was higher ahead of a decision from the Reserve Bank of Australia on whether to cut interest rates on Tuesday, with a minority expecting a 25 basis point cut. The Aussie rose 0.1 per cent against the US dollar to $1.0441.
The dollar continued its trend of strengthening against the Japanese yen, rising 0.4 per cent to Y93.13.
