Dollar weakens as euro climbs on EU common fund proposal

Euro banknotes with different values.
Jens Büttner | picture alliance | Getty Images

The U.S. dollar fell to a more than two-week low against the euro as the common currency enjoyed a boost from the recently announced proposal for a common fund that could move Europe closer to a fiscal union as it tries to counter the economic hit from the coronavirus pandemic.

France and Germany have proposed a 500 billion euro ($543 billion) Recovery Fund to offer grants to regions and sectors hit hardest by the coronavirus crisis and to allow borrowing by the European Commission on behalf of the whole EU.

The euro also found strength from survey data on Tuesday that showed German investor sentiment improved much more than expected in May.

"The euro is challenging yesterday's highs vs. the dollar as well as major peaks achieved in early May and April," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

The single currency was up 0.54% at $1.0983, its highest since May 1.

The dollar found little support from the release of the minutes of the U.S. Federal Reserve's most recent policy-setting meeting, which showed policymakers agreed to use their tools "as appropriate" to support the economy and re-upped a pledge to keep interest rates near zero.

The U.S. dollar, which draws flows when investors shun risk, was broadly weaker on the day as market participants appeared to bet on hopes of a strong economic recovery from a coronavirus-fueled slump.

The U.S. Dollar Currency Index, which measures the greenback's strength against six major currencies, was down 0.42% at 99.138, on pace for its third straight day of losses.

The risk-sensitive Aussie dollar rose 0.98% to a 10-week high against the U.S. currency.

Sterling fell 0.14% against the U.S. dollar after data showed UK inflation fell to 0.8% in April, its lowest in nearly four years.