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Euro hits 1-week high on upbeat data, view on ECB

Key Points
  • Lautenschlaeger feeds bets on ECB paring asset purchases
  • Catalonia's separatist move from Spain caps euro rise
  • Catalan leader defends independence, open to talk with Madrid
  • Dollar index hits 1-week low on reduced hopes for tax overhaul
Jim Dyson | Getty Images

The euro hit a one-week peak on Tuesday as Germany rang up its best month for exports in a year in August and expectations grew that the European Central Bank may consider scaling back its asset purchases.

The currency's rise this year had lost some momentum in recent days following Catalonia's Oct. 1 referendum to break away from Spain. The euro has fallen more than 3 percent against the dollar over the last month, but underlying economic data has shown resilience.

"The focus is shifting away from the political news to the economic data and that is turning to be euro positive, and we should see the currency supported before the ECB meeting," said Viraj Patel, an FX strategist at ING Bank in London.

German exports rose 3.1 percent in August, their strongest month in a year, putting Europe's economic engine on track for a solid 2017. The euro gained 0.6 percent to $1.1805, its strongest since Oct. 2, after overnight comments from Sabine Lautenschlaeger, an ECB executive board member, calling for the ECB to roll back asset purchases in 2018.

It was last up 0.03 percent at $1.809.

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The ECB is expected to decide on Oct. 26 whether to continue bond purchases next year. Signals from policymakers suggest they will opt for lower volumes but also an extension of the scheme, possibly by six or nine months.

The euro briefly pared gains after Catalonia's secessionist leader Carles Puigdemont in parliament defended the region's independence from Spain after this month's vote, but he proposed to suspend the results to allow talks with Madrid. Spain's government warned it would take steps, including dissolving the Catalan parliament or petitioning the courts to rule that a secession is unconstitutional.

"Anything that shows Catalonia is open to talks would be well received by European assets," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

The euro's strength also came at the expense of the dollar, which has receded from a 10-week high on tensions between the United States and North Korea over the latter's nuclear weapons program.

A spat between U.S. President Donald Trump and an influential Republican lawmaker, Senator Bob Corker, raised speculation that the tax overhaul plan Trump introduced would stall, weighing down the greenback.

An index that tracks the dollar against a basket of currencies was down 0.44 percent at 93.26 after hitting a one-week low of 93.137.