Euro hits three-year high

The euro climbed nearly 1 percent to $1.2536, its highest since mid-December 2014

The euro surged to a new three-year high on Thursday after European Central Bank President Mario Draghi said economic data pointed to “solid and broad” growth with inflation likely to rise in the medium term from subdued levels.

The euro climbed nearly 1 percent to $1.2536, its highest since mid-December 2014. It was last up 0.79 percent at $1.2504.

Draghi warned that the surge in the euro was a source of uncertainty and said the ECB might have to review strategy if U.S. comments on the benefits of a weak dollar lead to a change in monetary conditions.

The dollar had slid against the euro on Wednesday after U.S. Treasury Secretary Steve Mnuchin said he welcomed a weaker dollar.

Some market participants had been expecting Draghi to take a firmer stance addressing the euro’s potentially damaging surge against the dollar.

Overall, the comments regarding the exchange rate were benign, said Eric Viloria, currency strategist at Wells Fargo Securities in New York.

There was a lack of any forceful comments with respect to the recent euro strength, he said.

The dollar index, which measures the U.S. currency against six other currencies, was down 0.71 percent at 88.575, after declining as low as 88.438, its lowest since December 2014.

Some of this USD sell off is now technical in nature, and the trend following crowd is likely pressing the bet a bit, Brad Bechtel, managing director FX at Jefferies, said in a note.

Wells Fargo’s Viloria said that from a technical standpoint the dollar index has scope to move lower.

It remains within an overall downwards trend, he said.