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The euro edged higher on Friday, on track for its biggest weekly rise in a month as investors switched focus from the euro zone's political concerns to its brightening economic outlook.
Appetite for the single currency was also supported by strong Chinese trade data for September and a weakening dollar following cautious comments from US policymakers.
“If the European economic recovery continues and the ECB pushes ahead with policy normalisation, we will see the euro trade above 1.30 within 18 months or so,” said Kit Juckes, an FX strategist at Societe Generale in London.
The single currency was trading 0.1 per cent higher at $1.1839 on Friday. It has gained 1 per cent so far this week, putting it on course for its biggest rise since the week of September 9.
ECB policy meet
European Central Bank policymakers broadly agreed to extend the asset purchases at a lower volume at their October policy meeting with views converging on a nine-month extension, five people with direct knowledge of the discussion told Reuters.
The dollar was set for its biggest weekly drop in more than a month as US Treasury yields stayed near recent lows before US inflation data.
The dollar index, which tracks the currency against a basket of six major peers, was 0.1 per cent lower at 92.970, and poised to shed 0.9 per cent for the week.
The index had risen to a 10-week peak of 94.267 last Friday after robust US wages data hardened expectations for a December Federal Reserve rate hike, but it has slipped through the week along with a steady decline in Treasury yields.
“When the US 10-year yield struggles below 2.4 per cent, it comes as no surprise to see the dollar having a difficult time rising against the yen,” said Makoto Noji, senior strategist at SMBC Nikko Securities.
“The difference between domestic and foreign bond yields drive short-term trends and yen selling momentum is suppressed when foreign yields stay relatively low.”
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