The euro rose to a four-month high against the dollar on Wednesday on hopes European Union leaders may agree on stimulus and deepening fiscal integration to shield the economy from the pandemic.

The dollar was on the defensive, particularly against other growth-leveraged currencies such as the Australian dollar, following an uptick in U.S. inflation and news of progress in vaccine development.

The euro rose to as high as $1.1423, its highest level since March 10 and not far off its peak so far this year of $1.1495.

Against the yen, the common currency hit one-month high of 122.47 while it scaled a two-week high against the British pound at 91.125 pence.

The euro™s strength helped to push the dollar index to 96.056, one-month low.

The dollar extended losses on Tuesday after U.S. consumer prices rebounded 0.6% month-on-month, the most in nearly eight years, in June, easing worries about deflationary pressures from the economic downturn.

Against that backdrop, the risk-sensitive Australian dollar rose 0.2% to $0.6985.

Sterling, however, underperformed after data showed Britain™s economy was recovering more slowly than forecast.

The pound last traded at $1.2571.

The yen was little moved at 107.27 yen per dollar, off two-week high of 106.635 ahead of the Bank of Japan™s policy announcement expected later in the day.

Source: Reuters