- US dollar index hits new 12-year high, advancing to 99.30.
- EURUSD falls to fresh 12-year low, as Greek government demands Germany pay WWII reparations.
- ECB President Draghi assures markets that the Greek debt crisis would not impact other Eurozone member-states.
The US dollar rallied to a new 12-year high against a basket of trade-weighted currencies, as the euro crumbled to new lows amid ongoing debt negotiations between Greece and the Eurozone.
The dollar index, a weighted average of the US dollar against a basket of peers that includes the euro, yen, pound, franc, loonie and krona, climbed 0.7 percent to 99.3, a new 12-year high. The index has advanced more than 3 percent since the government’s nonfarm payrolls report last Friday, which showed the creation of 295,000 jobs in February.
The dollar set a fresh 12-year high against the euro, which continued to struggle under the weight of the Greek debt crisis. The Greek government upped its rhetoric on Wednesday after it suggested that Germany – which is shouldering the bulk of Greece’s €240 billion bailout – should pay Athens WWII reparations for crimes carried out by the Nazis. Prime Minister Alexis Tsipras demanded Germany pay back more than €160 billion in “unfilled obligations.”
A spokesman from Germany’s finance ministry said there would be no negotiations over the war-time debts.
The EURUSD declined more than 100 pips on Wednesday, reaching a daily low of 1.0560. That was also a new 12-year low for the pair, which has been in free-fall over the past five days. The EURUSD subsequently consolidated at 1.0593, declining 0.8 percent.
European Central Bank President Mario Draghi assured the markets on Wednesday that the central bank’s bond-buying program would contain the Greek debt crisis and ensure that no other Eurozone member-state would be impacted. The ECB rolled out its quantitative easing program on Monday. The program will run until September 2016, injecting up to €1 trillion into the Eurozone in the form of sovereign bonds.
Central bankers believe that QE will support growth throughout the euro area. Last week the ECB upgraded its GDP and inflation forecasts over the next two years. According to the revised outlook, inflation will reach the ECB’s target of just below 2 percent in 2017.