By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — A modest euro rally lost steam Thursday after the German parliament approved legislation to boost the size and scope of the European Financial Stability Facility, the euro zone’s bailout fund.
The 621-member Bundestag backed the legislation in a 523-85 vote, with three abstentions. More crucially, German Chancellor Angela Merkel’s ruling center-right coalition provided 315 votes, news reports said, meaning she didn’t have to rely on the backing of opposition parties to win passage of the measures.
The euro EURUSD +0.5658% traded at $1.3613 versus the U.S. dollar, up from $1.3551 in North American trade late Wednesday. The shared currency rose 0.6% versus the Japanese yen EURJPY +0.6753% to trade at 104.29 yen, but was steady versus the British pound EURGBP +0.1096% at 87.01 pence.
Merkel had struggled in recent weeks to limit defections from the coalition made up of her Christian Democratic Union; its sister party, the Christian Social Union; and the Free Democrats, the junior coalition partner.
Failure to maintain an “absolute majority” through her own coalition would have left Merkel vulnerable to calls for early elections, analysts said.
“Europe and the euro does not need a weakened German chancellor,” said Stephen Pope, managing director of Spotlight Ideas.
The lack of sustained gains for the euro comes as investors now shift their attention to a vote on the EFSF package by Slovakia, as well as efforts to further beef up the EFSF and next week’s European Central Bank meeting, said Kit Juckes, head of foreign exchange at Societe Generale.
The dollar index DXY -0.46% , which measures the U.S. unit against a basket of six major currencies, slipped to 77.673 from 77.995 late Wednesday.
The U.S. unit traded at ¥76.61 versus the Japanese yen, little changed from Wednesday. The British pound changed hands at $1.5643, up from $1.5582.
William L. Watts is a reporter for MarketWatch in Frankfurt.
