The U.S. dollar's weakness has continued, with the euro reaching its highest level in 3 years and 7 months.
On the 12th (local time), the euro was trading at $1.1611 in the foreign exchange market. This is the highest level since November 2021.
Reuters analyzed that the preference for safe assets due to geopolitical crises, including the possibility of a breakdown in nuclear negotiations between the U.S. and Iran, has had an impact. Additionally, the European Central Bank's (ECB) hawkish stance has led to the euro's strength.
On the 5th, the ECB lowered its deposit rate by 0.25 percentage points to 2.00% per annum. The gap with the Federal Reserve's benchmark interest rate (4.25% to 4.50%) has widened to 2.25% to 2.50 percentage points. However, Christine Lagarde, the ECB president, noted that she thinks "we are nearing the end of the monetary policy cycle" and hinted that the rate cuts would soon conclude.
At the beginning of this year, the outlook for the euro was predominantly bearish. Many investment firms predicted that the euro would break parity (1 euro = $1) and fall below $1. However, the euro has surged over 13% in the past five months.
The ECB is claiming a 'bullish trend for the euro' amid declining confidence in the U.S. dollar. In a report released the day before, President Lagarde stated, "There could be bigger changes in the international monetary order. The tariffs imposed by the U.S. government have created highly unusual correlations between assets," and added, "This could strengthen the euro's role, and it is important for European authorities to create the conditions necessary for this."