Euro stabilizes and hopes of lifting Covid restrictions in China boost sentiment ahead of Fed minutes

The euro stabilized on Wednesday, January 4, and high-risk currencies recovered thanks to optimism that China’s lifting of Covid restrictions would boost growth, while investors’ focus shifted to US data and the Federal Reserve.

The euro had lost 1% overnight, its biggest drop in more than two months after a larger-than-expected decline in German inflation, but it rose from a 3-week low of $1.0570 in Asian trading.

The Australian dollar rose 1% to $0.6800 after overnight losses, and the yuan rose 0.4% to 6.8913 against the dollar, on its way back to its level on Tuesday, the highest in 4 months.

China’s state media reported a “final victory” over the pandemic, fueling market bets that China’s easing of rules and reopening is irreversible.

The yen rose 0.1% to 130.83 against the dollar.

The dollar index rose 1% yesterday, Tuesday, to 104.73, mostly due to the decline in the euro, and it retreated somewhat today, Wednesday, to 104.57, and the pound sterling touched 1.1973 dollars.