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By Bloomberg

The euro made its third attempt this month to climb and stay above $1.10 as Federal Reserve Vice Chairman Stanley Fischer added to speculation U.S. interest rates will increase at a limited pace as stimulus expands in Europe.

The single currency extended its biggest weekly gain in three years on Monday after Fischer said there won’t be a “smooth upward path” for interest rates even as the first increase may be warranted before the end of 2015. The euro has strengthened 3.1 percent versus the dollar since the Fed on March 18 cut projections for future rates, inflation and growth.

“Fischer’s comments dashed market speculation for a June rate hike and with the Fed stance, expectations are now pushed back to September,” said Kengo Suzuki, chief currency strategist at Mizuho Securities Co. in Tokyo. “It squashed greenback-buying momentum and led to a correction of one-sided dollar purchases and euro sales. The euro could reclaim $1.10. At the same time, it’s difficult to see the euro rising steadily and any upside will likely spark fresh selling.”

The euro rose to as high as $1.0968 before retreating to $1.0917 as of 12:42 p.m. in Tokyo from $1.0946 on Monday. It has rallied more than 4 percent since touching a 12-year low of $1.0458 on March 16. The euro was at 130.71 yen from 131.05.

The Bloomberg Dollar Spot Index gained 0.3 percent to 1,187.46, after touching 1,183.74, the lowest level since March 6. It tumbled 2.2 percent last week, the biggest weekly decline since October 2011. The U.S. currency was at 119.75 yen from 119.73 in New York.

‘Mixed’ Market

San Francisco Fed President John Williams, who votes on central bank policy this year, said in remarks prepared for delivery in Sydney Tuesday that a discussion should happen mid- year about tightening policy. He also said that he sees a stronger dollar pushing down growth.

“Williams gave dollar a bit of a lift because he didn’t rule out a tightening in June,” said Yuji Saito, director of foreign exchange at Credit Agricole SA in Tokyo. “Markets remain mixed over the outlook of the Fed tightening with Fischer’s comments blending with that of Williams’.”

Fischer said Monday in New York that “a smooth path upward in the federal funds rate will almost certainly not be realized” as the economy will encounter headwinds such as the surprise plunge in oil prices. He said while forward guidance on rates remains important, its role may diminish.

Traders predict 56 basis points of increases to the federal funds target rate over the next 12 months, down from 62 on March 6, according to a Credit Suisse Group AG swaps index.

Sentiment Turns

“Fischer’s comments have had a considerable impact on markets amid sentiment that has turned against the dollar since last week’s Fed meeting,” said Keisuke Hino, a foreign-exchange trader at Mizuho Bank Ltd. in New York. “The one-sided dollar- buying scenario has crumbled, so there is still scope for more selling of the currency.”

European Central Bank President Mario Draghi told the European Parliament on Monday that growth in the region was gaining momentum, and pointed to the 60 billion euros ($66 billion) monthly bond-buying program as a key factor. He said he sees no signs that there will not be enough bonds to purchase.

Australia’s dollar declined against all of its 16 major counterparts after private report showed China’s manufacturing unexpectedly contracted in March.

The preliminary estimate for the manufacturing purchasing managers’ index by HSBC Holdings Plc and Markit Economics dropped to 49.2 from 50.7 in February, falling short of the median estimate of 50.5 in a Bloomberg News survey of analysts.

The Aussie slipped as much as 0.6 percent to 78.37 U.S. cents from yesterday. It had gained earlier today to as high as 79.03, the strongest since Feb. 26.