The euro rallied 0.6% to a 14-month high of $1.4306 against the US dollar this morning, after the head of the International Monetary Fund (IMF) Dominique Strauss-Kahn said he does not believe the ‘Spanish government needs any type of financial aid’.

‘We have not received any request for help from the Spanish government,’ Mr Strauss-Kahn said. ‘I believe that the policies that the Spanish government has implemented, as much on the fiscal side as in the reform of pensions, the labour market or in banking, are the correct policies,’ he added. ‘And what I see is that over the last few months, Spain has been put in the same bag as other countries, such as Greece, when they are clearly not in the same situation.’ Spain’s economy is bigger than Ireland, Portugal and Greece put together. Investors are rushing back to the euro on anticipation of a rate hike by the ECB tomorrow. Last month ECB President Jean-Claude Trichet signalled that interest rates are poised to increase, while the Swiss National Bank board member Jean-Pierre Danthine told Boersen-Zeitung today that a rate rise by the ECB would give Switzerland’s central bank leeway in deciding its own policy.

The Federal Reserve minutes, released last night, also supported the euro’s ascent. It showed differences of opinion remain with regards to QE2. A few members said that tighter monetary policy may be needed in the US this year, while others continued to think that loose policy is required into 2012. Fed Chairman Ben Bernanke and his two deputies were on the dovish side of the argument, suggesting it is still too soon to start pricing in monetary tightening in the US.