Wednesday, Jan 02, 2013
SINGAPORE - The euro surged against the dollar on Wednesday as traders flocked to the riskier single currency with the US Congress poised to endorse a deal to avert the "fiscal cliff" budget crisis.
The euro strengthened to US$1.3262 (S$1.62) in morning Asian trade from US$1.3192 on Monday. The euro was at 115.28 yen (S$1.62) from 114.45 yen. The dollar rose to 86.95 yen from 86.69 yen.
The fiscal cliff deal was spurring traders to shift their investments from the safe-haven greenback to riskier currencies, said Jason Hughes, head of premium client management for IG Markets Singapore.
The deal passed the Senate on Tuesday but its fate hung in the balance for hours as House conservatives sought to amend it to include big spending cuts, which would likely have killed its chance of passage.
The House of Representatives was due to vote late Tuesday Washington time.
Had the deal splintered, all Americans would have been hit by tax increases and the spending cuts would have kicked in across the government, in a combined US$500 billion shock that could have rocked the fragile recovery.
"We saw risk currencies react positively to the fact that a deal has gone through the Senate and is likely to find its way through the House," Hughes told AFP.
"Despite the development in the US that should be US dollar positive, it actually lends support to the risk currencies at the moment," he added.