By Karen Brettell
NEW YORK (Reuters) – The greenback hit a more than two-year high against the euro on Wednesday as investors put more money into the U.S. stock market on growing optimism that the coronavirus will be contained.
China reported on Wednesday its lowest number of new coronavirus cases in two weeks, bolstering a forecast by Beijing’s senior medical adviser for the outbreak in the country to end by April. Even so, fears of further international spread remained.
“The market is reasonably confident that China will be able to get control of the virus, although it may take some time,” said Steve Englander, head of global G10 FX research at Standard Chartered in New York. “The fact that it just doesn’t seem to be as deadly outside of China is something that’s comforting markets.”
The S&P 500 and Dow Jones Industrials hit all-time highs on Wednesday.
Investors also grew more comfortable with risk on the view that central banks are likely to provide increased accommodation if the coronavirus harms the global economy.
On Tuesday, Federal Reserve Chair Jerome Powell told Congress the U.S. economy is in a good place, even as he cited the potential threat from the coronavirus in China and some long-term concerns.
The dollar gained 0.26% against the Japanese yen <JPY=> to 110.06 yen. The euro <EUR=> dropped 0.41% against the greenback to $1.0869, the lowest level since May 2017.
The greenback has strengthened against the euro as economic data shows a brighter economic outlook for the United States than for the euro zone.
“The U.S. economic data is still superior to other economies’ and the growth gap with the rest of the world remains substantial,” said Ugo Lancioni, portfolio manager of the Neuberger Berman Macro Opportunities FX Fund.
Political uncertainty in Germany is an additional headwind for the single currency.
Annegret Kramp-Karrenbauer, leader of Chancellor Angela Merkel’s Christian Democrats (CDU), on Monday confirmed she would not run for chancellor in next year’s federal election, but said she would remain party chair until another candidate is found.
The New Zealand dollar <NZD=> jumped to a one-week high after the central bank removed the chance of a rate cut from its forward projections.
(Additional reporting by Saikat Chatterjee in London; Editing by David Gregorio and Leslie Adler)