The euro hovered close to a two-year high against the dollar on Friday as a souring of German business morale did little to dent bullish sentiment toward the eurozone common currency.
German Ifo business sentiment data fell unexpectedly for the first time in six months, sparking concern about the impact of a stronger euro on the region's exporters.
That followed sub-forecast euro zone private sector activity surveys on Thursday, suggesting that recovery in the euro zone has stalled.
Still, the euro's fall was minimal and many analysts say it could rise toward $1.40 as investors seek alternatives to a dollar hobbled by expectations the Federal Reserve will maintain its current level of monetary stimulus.
"Traders continue to make the euro their favorite anti-dollar trade in light of expectations the Fed will continue its QE (quantitative easing) program well into the start of next year," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.
In contrast, Schlossberg noted that market participants do not expect any change in the European Central Bank's monetary policy despite recent the soft euro zone data. That should keep the euro well bid, at least against the dollar, he added.
"Euro zone officials are unlikely to sit idly while a rise in the euro threatens to derail a fragile economic rebound," said Esiner. "Increased vocal opposition to euro strength by policymakers will further limit the currency's gains."
Source: Reuters
