Reuters – The euro popped above the 1.18 mark for the first time in three weeks on Wednesday as investors resumed buying European equities while the dollar found itself on the back foot for a second day as US bond yields declined.
With the eurozone’s annual economic growth rate outstripping that of the US in the third quarter, led by Germany, markets are increasingly optimistic about the region’s outlook.
“The dollar is getting hit against the euro and the yen and the strong data out of Europe is definitely a factor with some investors bailing out of the long dollar trade,” said Alvin Tan, an FX strategist at Societe Generale in London.
The single currency punched through a key technical level of $1.1734 on Tuesday and extended gains on Wednesday to rise 0.2% at $1.1824 against the dollar.
Over the last few sessions, unhedged purchases of European stocks have picked up noticeably after declining in October.
Despite the rise, some investors remain sceptical about the outlook for the currency, with a Bank of America Merrill Lynch fund manager survey for November pointing out that the percentage of investors saying the euro is overvalued has grown to 12% from 4% in the previous month.