The Euro was able to gain against the majority of its counterparts after borrowing costs in Spain and Italy (the third and fourth largest economies in the Eurozone) dropped.
After Spain’s 10-year yield fell to the lowest level since November 2010 and Italy sold 2016, 2017 and 2018 bonds the Euro climbed to 1.3138 US Dollars, its strongest level since the end of end of February, before edging down to 1.3119 US Dollars.
The common currency also achieved a fresh over three-year high against the Yen as the increasing odds of global central banks maintaining fiscal stimulus caused demand for assets with a higher yield to heighten. After hitting 130.83 Yen a slight downward correction saw the Euro trading in the region of 130.45 Yen.
As currency strategist Michael Sneyd observed, ‘The Euro has been cheap versus the Dollar. Our analysis shows that it has been undervalued, relative to what has been going on in Italian and Spanish bond markets.’
Sneyd went on to predict that within the next three-months the Euro will advance to 1.35 US Dollars.
Other higher-yielding currencies, including the Australian Dollar, New Zealand Dollar and Canadian Dollar, also gained. As well as benefiting from the expectation of stimulus measures being upheld globally, the outlook of commodity driven nations has been boosted by the Bank of Japan’s decision to expand its monthly bond-buying programme.
The Australian Dollar, which broadly softened following the release of disappointing Australian employment figures, strengthened to trade in the region of a four-month high, while the ‘Kiwi’ hit its highest level since mid 2011.
Meanwhile the US Dollar slid against all but one of its main currency rivals.