Bloomberg News

Euro Advances From One-Week Low Versus Dollar After EU Agreement

December 09, 2011

Dec. 9 (Bloomberg) -- The euro rose from a one-week low against the dollar after the region’s leaders boosted a rescue fund and tightened budget rules to counter the debt crisis.

The 17-nation currency gained the most in a week versus the yen as leaders holding all-night talks in Brussels added 200 billion euros ($267 billion) to their crisis-fighting capacity and toughened anti-deficit rules. Norway’s krone rose as crude oil advanced for the first time in three days and European stocks advanced. The Dollar Index fell for the fourth time in five days.

“The euro has found some support as the EU leaders’ meeting delivered what was broadly expected,” said Paul Robson, a senior foreign-exchange strategist at Royal Bank of Scotland Group Plc in London. “They are gradually moving toward fiscal union. The market was already bearishly positioned, so it would have taken something quite poor to have come out of the EU summit to push the euro down.”

The euro gained 0.3 percent to $1.3376 at 8:27 a.m. in New York after dropping to $1.3282, the lowest level since Nov. 30. The single currency rose 0.3 percent to 103.86 yen after advancing as much as 0.8 percent, the most since Dec. 2. The yen was little changed at 77.68 per dollar.

European Central Bank President Mario Draghi declared the results of the EU talks as a “very good outcome” a day after he damped expectations that such a deal would prompt the ECB to step up its bond-buying operations.

ECB Buys Bonds

The ECB was said to buy Spanish and Portuguese government bonds, with two people saying they saw the trades for each nation. The sources declined to be identified, because the trades are private. An official at the ECB declined to comment.

“Since closer fiscal ties for the euro zone is broadly considered to be part of the solution for the sovereign-debt crisis, progress has been made,” Jane Foley, a senior foreign- exchange strategist at Rabobank International in London, wrote in a note to clients. “This week’s summit has done enough to keep European Monetary Union alive for now and to stop the euro plunging, but the crisis rumbles on.”

Italian 10-yields rose nine basis points, or 0.09 percentage point, to 6.55 percent even as leaders added funds to the European Financial Stability Facility. China’s central bank may use $300 billion of its reserves to invest in the U.S. and Europe, Reuters reported.

South Korea’s won fell against all its major counterparts after the central bank said the economy is likely to grow 3.7 percent next year, slowing from a 3.8 percent gain this year. Inflation is forecast at 3.3 percent, compared with 4 percent in 2011, the central bank said.

The won fell 1.4 percent to 1,146.83 per dollar, its worse daily loss in four weeks.

Krone, Dollar

Norway’s krone rose 0.9 percent to 5.7393 and crude oil futures rose 0.4 percent to $98.41 a barrel in New York.

The Stoxx Europe 600 Index added 0.7 percent, and Standard & Poor’s 500 Index futures climbed 0.1 percent.

The Dollar Index dropped for the fourth time in five days as signs the world’s biggest economy will avoid a recession reduced investor appetite for safer investments.

The Thomson Reuters/University of Michigan index of consumer sentiment climbed to 65.8 in December from 64.1 the prior month, according to a Bloomberg News survey before today’s report. Fewer Americans filed applications for jobless benefits last week, the Labor Department said yesterday.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the U.S. currency against those of six major trading partners, fell 0.3 percent to 78.600.

--With assistance from Jiyeun Lee in Seoul and Matthew Brown in London. Editors: Paul Cox, Greg Storey

To contact the reporters on this story: Keith Jenkins in London at kjenkins3@bloomberg.net Allison Bennett in New York at abennett23@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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