The euro edged toward its highest level in nearly four years on Thursday, while the yen held onto its gains following progress in trade agreements between the United States and its key trading partners, improving overall market sentiment.
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Currencies largely shrugged off reports that U.S. President Donald Trump would visit the Federal Reserve on Thursday. Trump has frequently criticized Fed Chair Jerome Powell for not cutting interest rates.
It remains unclear whether Trump will actually meet with Powell.
Markets are closely monitoring developments in tariff negotiations. On Wednesday, two European diplomats said the European Union and the United States are close to finalizing a trade deal that could involve a 15% U.S. tariff on EU goods, along with potential exemptions.
This follows the trade agreement between Washington and Tokyo, which includes tariff reductions on Japanese car imports and exemptions from new duties on other goods, in exchange for a $550 billion package of investments and loans.
Global markets responded positively to the latest developments, with risk assets climbing and investors selling off the U.S. dollar.
The Australian dollar rose to its highest level in eight months at $0.66135 on Thursday.
The euro held steady at $1.1776, hovering near the earlier-month peak of $1.1830, its strongest level in more than three years.
“These agreed trade frameworks between the U.S. and major economies are certainly positive for risk sentiment,” said Carol Kong, currency strategist at the Commonwealth Bank of Australia.
“We had expected the risk of a showdown between the U.S. and the EU… but it seems that risk has faded,” she added.
Against the yen, the dollar dropped 0.3% to 146.01, continuing its slide against the Japanese currency for the fourth consecutive session.
While news of the trade agreement lifted local equities, lingering political uncertainty in Japan limited the yen's gains.
Japanese Prime Minister Shigeru Ishiba on Wednesday denied reports that he planned to resign, following claims from a source and media reports suggesting he intended to step down in the wake of a bitter defeat in the House of Councillors election.
The British pound was steady at $1.3581 after rising 0.36% in the previous session.
The U.S. dollar index slipped slightly to 97.15, while the New Zealand dollar edged up 0.11% to $0.6053.
In addition to trade talks, markets are also focused on the European Central Bank’s interest rate decision, expected later on Thursday.
Reuters
