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The euro continued to climb as investors backed hopes the European Central Bank would announce an extension of its bond purchase programme to help support the peripheral eurozone economies.
Spreads between the yields on peripheral debt and the benchmark German bunds continued to tighten as Spain conducted a successful auction of three-year notes.
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The Spanish treasury sold €2.5bn worth of 2013 maturity bonds at an average yield of 3.717 per cent – above the 2.527 per cent at the last auction of these bonds in October, but below the 3.937 per cent seen in the secondary market on existing three-year yields. Interest in the sale was healthy, with a bid to cover ratio of 2.3.
Risk appetite was again a factor, a day after growth in global manufacturing indices helped equity markets and commodity prices push sharply higher. In this environment, the euro also continued higher, but at a more cautious pace as investors awaited the outcome of the ECB meeting.
Jean-Claude Trichet, ECB president, said on Tuesday that the central bank should not be underestimated in its determination to resolve the eurozone crisis.
“I cannot recall a more important ECB monetary policy meeting,” said Derek Halpenny at Bank of Tokyo Mitsubishi UFJ.
“The ECB stands alone as the most credible authoritative eurozone–wide institution that is in a position to act independently and aggressively in an attempt to stem the debt crisis.”
The euro gained support in the previous session after it was announced that the European Financial Stability Facility would conduct its first bond sale next month to start raising funds for any future rescue packages.
Meanwhile, the latest eurozone growth data for the third quarter showed that gross domestic product rose by 0.4 per cent quarter-on-quarter as previously reported in flash estimates.
On Thursday, the single currency was up a further 0.5 per cent to $1.3190 against the dollar and gained 0.2 per cent to £0.8426 versus the pound. Against the yen, the euro climbed 0.4 per cent to Y111.10.
Sterling also climbed against a generally weaker dollar, up 0.2 per cent to $1.5633, while the yen was flat at Y84.17 versus the US currency.
