Euro continued to rally against the dollar to reach a four-and-a-half month high, supported by growing speculation over interest rate hike in April by the European Central Bank (ECB).
The EUR/USD was last up 0.1 pct at $1.4237, after touching the highest since early November 2010 at $1.4246 on EBS. Euro/dollar is supported after Trichet continued to signal a rate hike in April and by developments in yields. A test of the $1.4283 level is extremely likely in the next couple of days, if not today, Reuters reported, quoting Mic Ingenuus, currency strategist at Nordea in Copenhagen.
The ECB’s hawkish view continued this week and indicated that the Japan earthquake will not affect the timing of rate hike by the bank.
“The board of governors remains ready to react in a resolute manner and at the opportune time to avoid heightened risks materializing and weighing on the stability of medium-term prices and... great vigilance is called for, with a view toward containing the heightened risks to price stability,” said Yves Mersch, governing council member, ECB.
The UK sterling climbed to 14-month high against the greenback after the release of UK inflation data for February. The sterling climbed to its highest since January 2010 at $1.6377, from $1.6338 ahead of the data release.
The annual consumer price index (CPI) in the UK rose to 4.4 percent in February compared with 4 percent in the previous month, the Office for National Statistics said on Tuesday.
UK inflation rate in February remained above the central bank’s target of 2 percent for the fifteenth consecutive month, strengthening expectations over interest rate hike by the Bank of England (BoE) as early as May.