The euro jumped to its highest level in over three weeks against the dollar on Monday after European Central Bank officials advocated for further bold measures to tighten monetary policy, while the dollar declined against most major currencies except for the Japanese yen, which remains under pressure. The euro rose about 1.5 percent to 1.0198 dollars, marking a strong increase from last week's 20-year low of 0.9862 dollars.
German Bundesbank President Joachim Nagel stated in a German radio interview at the weekend that if the consumer price picture does not change, "clear further steps must be taken." Sources told Reuters that ECB policymakers see increasing risks necessitating a raise in the main interest rate to two percent or more to curb record inflation in the eurozone.
Jane Foley, head of foreign exchange strategy at Rabobank, noted that the potential drop in U.S. inflation data on Tuesday, which has also boosted stocks, is causing investors to shy away from the dollar as a safe haven, although this was likely an opportunity for profit-taking. She added, "As long as the market is fearful of taking significant risks in high-risk currencies, the dollar will remain elevated for another six months or so."
The euro also rose against the British pound, recording 87.22 pence, its highest since February 2021. As the dollar dropped during the day, the pound rose 0.8 percent against the dollar to 1.1678, reaching its highest level this month during early trading in London, representing a small rebound from last week's low.
The dollar index, which measures the performance of the U.S. currency against six major currencies, fell 0.67 percent to 108.25, retreating from a 20-year high of 110.79 reached on Wednesday.
