The euro rose against the dollar on Monday after disappointing U.S. home sales numbers sent investors ditching the greenback on sentiments that even though the Federal Reserve is in the process of winding down stimulus programs, monetary authorities will take their time dismantling monetary support tools until the economy shows marked improvement.
In U.S. trading, EUR/USD hit 1.3815, up 0.51%, up from a session low of 1.3729 and off a high of 1.3819,The pair was likely to find support at 1.3729, the earlier low, and resistance at 1.3894, Friday''s high and a 26-month high.
The National Association of Realtors reported earlier that its pending home sales index increased by a seasonally adjusted 0.2% in November, far shy of market expectations for a 1.0% gain. Pending home sales for October were revised to a 1.2% decline from a previously reported drop of 0.6%.
The disappointing data sent the greenback falling, wiping out gains locked in when the Federal Reserve announced it would trim USD10 billion from its USD85 billion in monthly bond-buying purchases beginning in January.
The Fed has said it may taper the program even more should data show that economic recovery is gaining steam.
Asset purchases tend to keep the dollar weak by driving down interest rates.
The euro, meanwhile, continued to see support after European Central Bank Governing Council member Jens Weidmann on Friday said keeping interest rates low may endanger political reforms.
According to Germany’s Bild newspaper, Weidmann said low inflation shouldn’t be used to justify loose monetary policy. "We must take care to raise interest rates again in a timely manner should inflation pressures build," he reportedly added.
The euro was also higher against the pound, with EUR/GBP rising 0.26% to 0.8363, and up against the yen, with EUR/JPY trading up 0.35% 145.06.
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