TOKYO- The dollar traded near a two-month high versus the euro on Wednesday as investors looked to a widening disparity between the strength of the US and Europe’s pandemic recoveries.
The view was bolstered by moves in Washington toward fast-tracking more stimulus spending that contrasted with concerns about extended European lockdowns and expectations for a decline in euro zone growth this quarter.
The dollar was little changed at $1.2038 per euro early in the Asian session, after strengthening to $1.20115 overnight for the first time since Dec. 1.
The broader dollar index was mostly flat at 91.081 after rising to a two-month high of 91.283 in the previous session.
The greenback’s advances come despite a rise in equities amid improving risk sentiment, defying the currency’s historic inverse directional relationship with stocks.
However, many analysts expect the correlation to reassert itself as the year progresses, and for the dollar to decline as global growth recovers amid massive fiscal stimulus and ultra-easy monetary policy.
“The relative growth dynamics between Europe — weak — and the US — better — are favoring the USD at the moment, but it remains to be seen if this can be a longer-lasting theme,” wrote National Australia Bank FX strategist Rodrigo Catril, who expects the euro to weaken below $1.20 in the near-term.