The Euro surged against the US Dollar to a 3-week peak in thin holiday trade, however it is still expected to close out the year lower. Analysts say that the Euro is likely to continue to come under pressure given the Federal Reserve’s likely rate hikes in 2017 and in anticipation of policies espoused by the Trump administration that are likely to boost inflation. What is a concern to some currency strategists, however, is the European Central Bank’s plan to reduce monthly bond purchases beginning in Q2 of 2017.

As reported at 11:38 am (JST) in Tokyo, the EUR/USD was trading at $1.0533, a gain of 0.42%; earlier the pair had hit a peak of $1.0700 before easing back. The EUR/GBP was up 0.18% to trade at 0.8575 Pence. Meanwhile the EUR/JPY was at 122.6072 Yen, a gain of 0.27%, falling back from the session peak of 123.87 Yen.

China Looks to Recalculate Yuan Basket

The Chinese Yuan is expected to end 2016 down about 7% against the greenback, the worst currency performer in Asia. In 2017, the Peoples Bank of China will modify a key Yuan index calculation. Some strategists have suggested that this move could be construed as a distraction from the Yuan’s intentional manipulation via both monetary and fiscal policy. The Chinese government has been attempting to keep the Yuan’s value depressed in order to encourage exports. Other Asian currencies, such as the Australian and New Zealand Dollars, have a symbiotic relationship with China. Currently, the AUD/USD was trading at $0.7235, up 0.19%, while the NZD/USD was at up 0.03% at $0.6966.