A weakening dollar has fallen by over one per cent against the yen in early trading on Monday. The dollar had traded at its highest level since the Iraq war last week on the back of the so-called “Trumpflation” trade.
The dollar index against a basket of currencies fallen by more than 0.6 per cent in morning trade. Against the yen the dollar was down over 1.2 per cent to ¥111.84.
The euro and the pound also gained from the dollar’s weakness. The euro gained 0.7 per cent to break through the $1.0650 mark despite opening below $1.06, while the pound gained 0.18 per cent to break back through the $1.25 mark.
The euro could still face significant headwinds before the new year. In the absence of major economic data today, all eyes will be on European Central Bank president Mario Draghi later today.
“We do not know whether Draghi will hint at a concrete action plan before the December meeting, yet we are certain that every word that will come out of his mouth would carry an important potential to move the euro markets in one direction, or the other,” said Ipek Ozkardeskaya, senior market analyst at London Capital Group.
And 2016 could still be in line to add one more big political shock to a tumultuous year, with Italy’s constitutional referendum taking place on Sunday. Italian Prime Minister Matteo Renzi has said that he will resign if voters reject his reforms.
“Current polls have the ‘no’ vote winning, something that may trigger the resignation of Renzi and a fresh batch of political instability in Europe. Yet for now the euro doesn’t seem too bothered, continuing to climb away from last week’s lows,” said Connor Campbell, an analyst at Spreadex.