On Monday, the euro rose to a more than three-week peak versus the dollar. The European common currency jumped 1.45 per cent to USD 1.0198, its highest since August 17. European Central Bank officials have argued for further aggressive monetary tightening.

Also, the euro’s strength was witnessed against the pound. It rose as high as 87.22 pence on Monday, the highest since February 2021. According to the sources, ECB policymakers think they will have to raise the key interest rate to 2 per cent or more to curb record inflation in the eurozone. On Tuesday, the chance of lower U.S. inflation data was pushing investors away from the haven dollar.
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The dollar’s weakness on the day implied sterling was up around 1 per cent on the dollar at USD 1.1695, its highest level this month, registering a small recovery from last week’s 37-year low. The dollar index measures the currency against six major counterparts, including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. It was down 1 per cent at 107.8, which was its lowest in two weeks and down from a two-decade peak of 110.79 on Wednesday.

Against the rate-sensitive Japanese yen, the dollar was steady at 142.66 yen. Japanese officials had hinted at intervention to stop the currency from weakening further. As per media reports, the administration is bound to take steps as required to counter excessive yen declines. However, the Bank of Japan is unlikely to step in to support the currency with higher interest rates.