The US dollar fell sharply against the euro on Friday as the common currency jumped on hopes that a Brexit deal between the UK and the EU could improve the odds of the eurozone avoiding a recession for now.
In one of the most striking flourishes of the three-year Brexit drama, British Prime Minister Boris Johnson on Thursday confounded his opponents by clinching a new deal with the EU, even though the bloc had promised it would never reopen a treaty it agreed last year.
The euro has been rattled this year by dismal manufacturing data and by worries that deepening economic tensions between the US and China could slow eurozone economies even further.
However, with Britainâ€™s Johnson and EU leaders agreeing a new deal for the UK to exit the bloc, and no recent bad news on the US-China trade front, the euro received a boost.
â€œWhile the results of tomorrowâ€™s vote is far from certain, we see the progress made over the past week as diminishing the chances of a no-deal Brexit,â€ said John Doyle, vice president for dealing and trading at Tempus Inc in Washington.
â€œA no-deal Brexit would be devastating for the UK economy, but the ripple effects into the mainland would be substantial,â€ Doyle said. â€œThat has helped lift equity markets, regional currencies and put downward pressure on the greenback.â€
The euro rose about 0.3 percent against the US dollar to US$1.12, a near two-month high.
The respite for the euro came as US economic data have grown increasingly gloomy, a development that could see the US Federal Reserve cut interest rates later this month, its third rate cut this year.
Poor domestic data make deeper cuts in US interest rates a touch more likely, Doyle said.
The New Taiwan dollar rose against the US dollar, gaining NT$0.070 to close at NT$30.611, rising 0.7 percent from Mondayâ€™s opening of NT$30.825.
The US dollar index, which compares the greenback against six major currencies, on Friday fell 0.48 percent to 97.14. For the week, it was down 1.2 percent, its worst weekly performance in 17 weeks.
Money markets are pricing in an 82 percent chance of a Fed rate cut at the Oct. 30 meeting, Refinitiv data show.
The pound rose about 0.5 percent against the US dollar to US$1.30 on Friday, even as doubts remained about whether the proposed Brexit deal will get through the British Parliament in yesterdayâ€™s vote.
For the week, the British pound rose 3 percent against the greenback.
The yuan held steady against the US dollar after data showed Chinaâ€™s economy grew at the slowest pace in more than 27 years in the third quarter, owing to a trade spat with the US and weak factory production.
Additional reporting by staff writer, with CNA