The dollar rose to a one-month high against the euro yesterday as a sell-off in global equities drove haven demand for the US currency.
- The dollar climbed strongly as stocks fell on evidence that banks are struggling to shake off the effects of the financial crisis, damping higher-yield demand.
- The single currency declined sharply from a session high of 1.4810 on Asian trade moving to a fresh one -month low at 1.4645, as stock markets plunged following weak results from UBS and news that RBS and Lloyds will undergo a severe shake up.
- The single currency came under further pressure in the wake of a rather gloomy economic outlook from the European Commission.
- The organisation stated that the EU economy will recover gradually over the next two years as unemployment and government budget deficits continue to climb. The commission expects the bloc’s economy to contract by 4.1% this year before expanding 0.7% next year.
- The report continued, stating that EU unemployment will likely reach 10.9% in 2010 and warned about a “highly uncertain” economic outlook in the region, which weighed on euro strength.