The dollar slid to fresh three-year lows against a currency basket on Monday as demand for the euro continued to be underpinned by speculation that the European Central Bank is preparing to scale back its massive stimulus program.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 90.51 by 03:15 AM ET (08:15 AM GMT) after falling as low as 90.39 overnight, a level not seen since December 2014.
EUR/USD was last at 1.2214 after hitting a fresh three year peak of 1.2239 overnight.
The single currency has rallied since last Thursday’s December ECB minutes said officials could consider a gradual shift in policy guidance from early 2018.
Any changes to the bank’s guidance would likely be seen by investors as an indication that policymakers are preparing to start winding down their bond buying stimulus program.
A faster rate of monetary tightening outside the U.S. would lessen the divergence between the Federal Reserve and other central banks, weighing on the dollar.
The euro received an additional boost after German Chancellor Angela Merkel moved closer to forming a coalition government, potentially removing an element of political risk for the euro zone.
Against the yen the dollar fell to its lowest levels since mid-September, with USD/JPY last at 110.73 after earlier falling as low as 110.58.
The yen was boosted by comments from Bank of Japan Governor Haruhiko Kuroda on Monday highlighting the country’s economic recovery.
Sterling also pushed higher against the dollar, with GBP/USD rising 0.22% to 1.3755, the highest levels since Britain’s vote to exit the European Union in June 2016.
The pound rallied on Friday following a report that the Netherlands and Spain are open to a deal for Britain to remain as close as possible to the EU after Brexit.
The pound shrugged off a subsequent denial of the report from officials from the Spanish and Dutch finance ministries.
The Australian and New Zealand dollars were also higher against their U.S. counterpart, with AUD/USD advancing 0.34% to 0.7944 and NZD/USD climbing 0.37% to 0.7273.
Trade volumes were expected to remain light on Monday with U.S. markets closed for the Martin Luther King Day holiday.
