The US dollar on Friday hit to its highest against the euro in 4-1/2 years since 2010 and reached parity with the Swiss franc following strong indication from the European Central Bank (ECB) that it is soon going to take an aggressive action to stimulate the Euro Zone economy, just as the US Federal Reserve Bank is reapplying its stimulus.
The European currency fell to USD 1.2002, its lowest level since June 2010, after European Central Bank President Mario Draghi made the statement that the ECB was unlikely to preserve the price stability as it was six months ago. This indicated that the European Central Bank has geared up to take bolder steps on its monetary stimulus to the ailing Euro Zone early this year.
David Rodriguez, a quantitative strategist at DailyFX.com, said, “Markets as well as the analysts have been talking about this for ages, but to hear it from the horse’s mouth has had a clear effect on the European currency.”
DailyFX.com is a unit of FX broker FXCM in New York.
Euro, which is single currency in Euro Zone, also received setback by the depressing euro zone manufacturing data. The dollar index touched a fresh about nine-year high of 91.131 and slashed its third consecutive weekly gain.
The dollar index provides a measurement of the greenback against a basket of six major currencies.
The divergence between the Fed’s path toward rate hike and looser monetary policies in Europe and Japan encouraged the dollar in 2014. Several analysts anticipated that the contrast in policy to fuel a continued dollar rally this year.
For the first time in more than four years, the US dollar hit parity with the Swiss franc. Draghi’s remarks further imposed pressure on the central bank of Switzerland to ease further for maintaining a 1.20-franc-per-euro limit, according to Alan Ruskin, global head of currency strategy at Deutsche Bank, New York.
While the euro was last down 0.82 percent against the US dollar at USD 1.2003, the American currency was last up 0.7 percent against the Swiss franc at 1 franc. The dollar gained 0.58 percent against the yen at 120.46 yen.
The benchmark S&P 500 stock index was mostly flat at ending trade at the Wall Street.