(Changes headline to reflect key reason for unit's advance)
* Carry trade boosts demand for U.S. dollar
* Coronavirus concerns maintain safety bid for greenback
By Karen Brettell
NEW YORK, Feb 11 (Reuters) - The dollar hit a four-month
high against the euro on Tuesday as investors chased higher
returns in the U.S., and after Federal Reserve Chairman Jerome
Powell adopted an upbeat view of the U.S. economy.
The greenback has gained against the single currency as data
reinforces a view that the U.S. economic outlook is more
favorable than that of the euro zone, and on safety buying on
concerns about the economic impact of the coronavirus outbreak
that originated in China.
Low volatility across most of the foreign exchange market
has also encouraged investors to seek out carry trades, where
they borrow in low-yielding currencies such as the euro and the
franc and invest in dollars or other high-yielding currencies.
“One of the big prevailing narratives right now is for the
carry trade,” said Erik Nelson, a currency strategist at Wells
Fargo in New York. “As volatility seems to be non-existent in
the FX market a lot of people are piling into this short euro,
long higher beta, higher interest rate currencies.”
At the same time, “you're looking at a euro zone economy
that just can't seem to get a lot of traction,” Nelson said.
“That's also more fundamentally supporting this idea that the
euro is sort of flat on its back right now.”
The euro EUR= fell as low as $1.0892 on Tuesday, the
lowest since Oct. 1, before rising back to $1.0907.
Comments by Powell on Tuesday affirmed the view that the
U.S. central bank is unlikely to change interest rates in the
near term.
Over the second half of 2019 "the economy appeared resilient
to the global headwinds that had intensified last summer,"
Powell said in remarks to the House Financial Services
Committee, as economic activity increased further and the labor
market strengthened.
With risks like trade policy uncertainty receding and global
growth stabilizing, Powell signaled he saw no reason to adjust
U.S. interest rates, unless new developments cause a "material
reassessment" to the current outlook. Concerns about the spread of the coronavirus also maintained
a safe haven bid for the U.S. dollar.
The death toll in mainland China from the outbreak climbed
past 1,000 on Tuesday, but the number of new confirmed cases
fell. Currency bid prices at 9:11AM (1411 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar EUR= $1.0907 $1.0909 -0.02% -2.70% +1.0920 +1.0892
Dollar/Yen JPY= 109.7600 109.7400 +0.02% +0.83% +109.9400 +109.7500
Euro/Yen EURJPY= 119.74 119.76 -0.02% -1.82% +120.0000 +119.6100
Dollar/Swiss CHF= 0.9778 0.9770 +0.08% +1.03% +0.9787 +0.9766
Sterling/Dollar GBP= 1.2953 1.2913 +0.31% -2.31% +1.2957 +1.2896
Dollar/Canadian CAD= 1.3296 1.3315 -0.14% +2.39% +1.3320 +1.3288
Australian/Doll AUD= 0.6715 0.6686 +0.43% -4.36% +0.6719 +0.6682
ar
Euro/Swiss EURCHF= 1.0667 1.0662 +0.05% -1.70% +1.0679 +1.0657
Euro/Sterling EURGBP= 0.8420 0.8447 -0.32% -0.40% +0.8458 +0.8421
NZ NZD= 0.6400 0.6383 +0.27% -4.99% +0.6400 +0.6380
Dollar/Dollar
Dollar/Norway NOK= 9.2450 9.2884 -0.47% +5.32% +9.2917 +9.2468
Euro/Norway EURNOK= 10.0847 10.1348 -0.49% +2.51% +10.1379 +10.0870
Dollar/Sweden SEK= 9.6495 9.6574 -0.12% +3.23% +9.6736 +9.6489
Euro/Sweden EURSEK= 10.5262 10.5387 -0.12% +0.54% +10.5505 +10.5280
(Editing by Bernadette Baum)