The dollar remained under pressure on the final day of 2010 Friday, as hopes for a sustained global economic recovery fueled appetite for riskier currencies.
Later today, German leader Angela Merkel is expected to reaffirm Germany’s commitment to the euro and urge the nation to back the single currency.
Germany is the backbone of the Euro zone economy, and its willingness to backstop the sovereign debt of its neighbors will play a crucial role in preserving the monetary union.
“Europe stands, in these months, in the middle of a great test. We must strengthen the euro. It’s not just about our money. The euro is far more than a currency,” Merkel will tell the country in her New Year address, according to a text released in advance.
The dollar continued to edge lower against the euro, slipping about a penny to $1.3389.
The pair has shown a lack of direction over the past month, wobbling around the $1.32 mark amid speculation the Federal Reserve will maintain its accommodative policy for most of 2011.
The dollar extended its downtrend against the yen, falling to a fresh 7-week low of Y81.25. Back in November, the dollar hit a 15-year low of Y80.22.
The buck dropped to a new record low of CHF 0.9347 against the Swiss franc.
A two-speed economic recovery will be extended into 2011 with rich nations facing weak growth and emerging markets moving ahead with strong recovery, according to IMF’s chief economist Olivier Blanchard.
In an interview to the Fund’s online magazine, IMF survey, Blanchard noted that along with their strong rebound, emerging economies will be facing tough challenges like managing possible overheating and capital flows.
Activity in the currency markets will be subdued today, with many traders gearing up for tonight’s New Years festivities. No economic data is expected from the US.
Yesterday, the Labor Department reported that initial jobless claims fell below 400,000 for the first time in more than two years.