Euro now 2nd best performing major currency vs USD in 2024
Could rally to 1.12 nearterm, FX analysts say
Gains seen limited, uncertainties still high

Aug 21 Reuters The euro is trading at its highest this year against the dollar, emerging as a clear winner from the recent ructions in global currency markets that have unsettled a strong dollar and halted a relentless slide in Japan39;s yen.

Having broken decisively above the symbolic 1.10 level , the euro39;s more than 2.5 gain in August sets the currency up for its best month since November.

Traders, distracted up until now by the yen39;s sudden surge after a surprise July 31 Bank of Japan rate hike and a broaddollar pounding as expectations for U.S. interest rate cuts grow, are paying attention.

After all, history shows 1.10 is not an easy level to crack and as recently as April, some analysts speculated the euro could weaken to parity. It39;s now the second best performing major currency versus the dollar this year after sterling.

The gains, forecast to be modest from here, are nevertheless notable as U.S. Federal Reserve rate cut talk coincides with speculation that further European Central Bank easing could be limited by sticky servicesector inflation.

It39;s a rate differential story, said Commerzbank currency analyst Volkmar Baur.

Inflation is coming down on both sides of the Atlantic, but the Fed is expected to move a little bit more aggressively on the way down, and that closes the rate spreads a little…