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Forex - Euro extends rally, hits 14-month highs against dollar

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Investing.com - The euro its highest level in almost 14-months against the dollar on Thursday as investors shrugged off efforts by the European Central Bank to moderate the message in a speech given by President Mario Draghi earlier this week.

EUR/USD hit a high of 1.1435, the strongest since May 11 2016. It was last at 1.1410.

The single currency was on track for a third day of gains after comments by Draghi on Tuesday fueled speculation that the ECB could soon start to unwind its quantitative easing program.

Draghi said factors weighing on inflation in the euro area were mainly temporary, adding that the bank could look through them.

He also said the ECB's stimulus will be gradually withdrawn as the euro zone economy improves.

ECB sources subsequently tried to damp down speculation over monetary tightening, saying that markets had misjudged Draghi's comments.

But the rally in the single currency continued, taking it to 16-month highs against the yen, with EUR/JPY up 0.45% at 128.32.

The U.S. dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, hit a trough of 95.57, the weakest since October.

Federal Reserve Chair Janet Yellen reiterated earlier this week that the bank would continue to gradually raise interest rates after it hiked rates this month, but the subdued inflation outlook in the U.S. has raised doubts over whether the Fed will be able to stick to its planned tightening path.

The dollar pushed higher against the yen, with USD/JPY rising 0.12% to 112.42.

A summary of the Bank of Japan's latest meeting published on Monday showed that policymakers favor sticking to ultra-loose monetary policy, with inflation still well below the banks 2% target.

The divergent monetary policy outlook between the Fed and the BoJ has helped support the dollar against the yen.

Meanwhile, sterling briefly rose above the $1.30 level after the Bank of England's Chief Economist Andy Haldane reiterated that interest rates may have to "edge up" if the cost of living continues to rise in the UK.

The comments came a day after BoE Governor Mark Carney warned that the continued growth in the UK economy would eventually lead to higher interest rates.

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