Bloomberg News

Euro Gains for First Time in 9 Days as Spain Bolsters its Banks

May 10, 2012

The euro strengthened for the first time in nine days against the dollar as Spain moved to bolster confidence in the country’s lenders, increasing confidence the region’s debt crisis can be contained.

The 17-nation currency climbed from a 12-week low versus the yen as a technical indicator signaled the slide in the currency was poised to end. The pound fell against most of its major counterparts before policy makers decide on whether to extend a 325 billion-pound ($524 billion) bond-purchase program that’s due to finish this month. Sweden’s krona weakened after report showed inflation slowed for a second month in April.

“We need some more bad news for the euro to take another leg lower,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. “We haven’t really got it today. It’s pretty much the same kind of news we’ve had since the weekend. There’s nothing fresh.”

The euro rose 0.2 percent to $1.2948 at 10:13 a.m. London time after declining to $1.2912 yesterday, the lowest level since Jan. 23. The shared currency gained 0.2 percent to 103.17. It slipped to 102.76 yesterday, the weakest since Feb. 16. The yen was little changed at 79.69 per dollar.

The euro’s 14-day relative strength index against the yen fell to 29 yesterday, below the level of 30 that some traders see as signaling an asset is poised to reverse direction.

Spain said it would take over Bankia (BKIA) SA, the nation’s third-largest lender, adding momentum to Prime Minister Mariano Rajoy’s efforts to bolster the financial system amid concern that possible hidden losses on banks’ books may push up the government’s borrowing costs.

Pound Falls

The pound fell 0.3 percent to 80.39 pence per euro, and dropped 0.2 percent to $1.6102.

Bank of England policy makers will halt their bond-buying program, according to 43 of 51 economists in a Bloomberg News survey. The rest expect an increase of at least 25 billion pounds. That’s the biggest split on the direction of policy since October, when the bank resumed quantitative easing.

The krona fell 0.4 percent to 8.9394 per euro and weakened 0.3 percent to 6.9054 versus the dollar.

Sweden’s inflation rate slowed to an annual 1.3 percent from 1.5 percent in March, Statistics Sweden said.

To contact the reporter on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net


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