The single currency pared recent gains on Friday, but has recovered in trading this morning

The single currency slipped back from multi-month highs against the dollar following positive US housing data, with the pair closing the week at 1.5006.

  • The US dollar found support after a report showed that US existing-home sales improved more than expected last month.
  • Resales of US houses jumped 9.4% in September to a seasonally adjusted annual rate of 5.57 million, the highest rate in more than two years, which stemmed the recent broad dollar sell off.
  • Analysts stated that the recent bout of euro strength could now be looking over-stretched, given huge accumulation of short positions on the dollar.
  • In addition, the single currency came under pressure at the end of last week after Henri Guaino, right-hand man of President Nicolas Sarkozy said that, “the euro at $1.50 is a disaster for the European economy and industry,” reaffirming the recent sentiment of the ECB.
  • However, the dollar has fallen to a fresh 14-month low against the euro in trading this morning after a Chinese central bank researcher called for moving some of the country’s massive foreign reserves into euro and yen holdings, weakening demand for the US currency.