By Gertrude Chavez-Dreyfuss and Harry Robertson
NEW YORK/LONDON (Reuters) -The euro rallied against the dollar on Thursday as French government bonds stabilized a day after the collapse of the French government, while bitcoin galloped to a record past $100,000, as investors cheered the nomination of a pro-cryptocurrency head to run the U.S. Securities and Exchange Commission.
Despite Thursday’s gains, the euro was on track to post a loss this week, the fourth in the last five weeks.
French President Emmanuel Macron met allies and parliament leaders on Thursday as he sought to swiftly appoint a new prime minister to replace Michel Barnier, who officially resigned a day after opposition lawmakers voted to outs his government.
That is not an easy task, according to Shaun Osborne, chief FX strategist, at Scotiabank (TSX:BNS) in Toronto.
“For now, local bonds have stabilized — outperforming OATs have closed the yield gap over 10-year Bunds — helping give the euro a modest boost,” he wrote in a research note, referring to French bonds.
The spread between French and German 10-year yields narrowed on Thursday to 77.2 basis points (bps), the tighest gap since Nov.22.
He added that the positive short-term price action on Wednesday coupled with moderate gains through the low $1.05s on Thursday, have given “the euro a shot at extending a little higher to test key resistance and potential bull trigger at $1.0590.”
Meawnhile, bitcoin, the world’s best known cryptocurrency, has been on a tear since November on expectations that Donald Trump’s U.S. election win will usher in a friendly regulatory environment for cryptocurrencies.
It rose to an all-time high of $103,649 in Asian hours, boosted in part by President-elect Trump’s nomination of pro-crypto Paul Atkins to run the SEC. It was last up 4% at 101,523, taking its year-to-date gains to more than 140%.
“With a better U.S. regulatory environment and next-generation stablecoins driving adoption in Europe, we believe bitcoin and the broader crypto market could continue to go from strength to strength,” wrote Arnoud Star Busmann, chief executive of Quantoz Payments, a Netherlands-based payments technology company.
EURO ON THE MEND
The euro was last up 0.6% at $1.0567, further moving away from the two-year low of $1.0332 hit at the end of November as traders braced for a drawn-out reckoning for France.
French lawmakers passed a no-confidence vote against the government on Wednesday evening, throwing the country deeper into a crisis that threatens its ability to tame a massive budget deficit.
Traders are all but certain the European Central Bank will cut rates next week and are pricing in around 157 basis points of easing by the end of 2025.
In Asia, the Japanese yen rose as high as 149.66 per dollar but was last up 0.3% at 150.18 as traders pondered whether the Bank of Japan will hike interest rates later this month. Analysts said comments from typically dovish policymaker Toyoaki Nakamura that he’s not opposed to rate hikes had helped push the currency higher.
Expectations had been growing that the BOJ will hike rates at its Dec. 18-19 meeting, buoyed by comments from Governor Kazuo Ueda. But media reports published on Wednesday suggested the BOJ may skip a rate hike this month, muddling those wagers.
The South Korean won dipped slightly as the nation’s finance ministry said the government would activate 40 trillion won ($28.35 billion) worth of market stabilization funds after the chaos that followed President Yoon Suk Yeol declaring martial law on Tuesday and then rescinding this.
The won was last down 0.2% at 1,416 per U.S. dollar.
The dollar index, which measures the U.S. currency against six rivals, fell 0.5% to 105.83.
It extended losses after data showed that initial claims for state unemployment benefits rose 9,000 to a seasonally adjusted 224,000 for the week ended Nov. 30. Economists polled by Reuters had forecast 215,000 claims for the latest week.
On Wednesday, Federal Reserve Chair Jerome Powell had said the U.S. economy is stronger now than the central bank had expected when it started cutting rates in September, and he appeared to signal his support for a slower pace of reductions ahead.
Bets on Fed rate cuts held broadly steady, however, perhaps influenced by weaker-than-expected services sector data released on Wednesday and the higher-than-expected jobless claims. Markets are pricing in about a 70% chance of a 25-bp rate cut later this month, and a 30% chance of a pause.
Currency
bid
prices at
5
December
04:13
p.m. GMT
Descripti RIC Last U.S. Pct YTD Pct High Low
on Close Change Bid Bid
Previous
Session
Dollar 105.85 106.34 -0.45% 4.42% 106.37 105.
index 72
Euro/Doll 1.057 1.0509 0.59% -4.23% $1.059 $1.0
ar 509
Dollar/Ye 150.3 150.49 -0.14% 6.54% 150.76 149.
n 69
Euro/Yen 158.83 158.29 0.37% 2.09% 159.38 157.
57
Dollar/Sw 0.8793 0.8847 -0.6% 4.49% 0.8852 0.87
iss 89
Sterling/ 1.2752 1.2702 0.4% 0.22% $1.2771 $1.2
Dollar 696
Dollar/Ca 1.4032 1.4074 -0.28% 5.87% 1.4078 1.40
nadian 11
Aussie/Do 0.6435 0.643 0.14% -5.56% $0.6453 $0.6
llar 422
Euro/Swis 0.9294 0.9292 0.02% 0.09% 0.9322 0.92
s 91
Euro/Ster 0.8286 0.8277 0.11% -4.38% 0.8294 0.82
ling 73
NZ 0.587 0.5852 0.35% -7.07% $0.5881 0.58
Dollar/Do 49
llar
Dollar/No 11.0443 11.0513 -0.06% 8.97% 11.0809 11.0
rway 11
Euro/Norw 11.6803 11.6168 0.55% 4.07% 11.6836 11.6
ay 124
Dollar/Sw 10.8766 10.9227 -0.42% 8.04% 10.9454 10.8
eden 5
Euro/Swed 11.4975 11.4815 0.14% 3.34% 11.5235 11.4
en 83
This post is originally published on INVESTING.
