BLBG:Euro Halts Two-Day Decline Against Yen Before Debt Summit, ECB’s Meeting
The euro halted a two-day drop against the yen after Germany and France said they want a summit to agree on rewriting the European Union’s governing treaties to tighten regional economic cooperation.
The 17-nation euro was bolstered on speculation the European Central Bank will increase monetary stimulus on Dec. 8. German Chancellor Angela Merkel and French President Nicolas Sarkozy yesterday presented a platform for a Dec. 8-9 meeting of EU leaders. Australia’s dollar halted yesterday’s gains before a central bank meeting as policy makers are forecast to cut interest rates. The yen rose against most major peers as concern growth will slow boosted demand for haven assets.
“There is definitely a degree of optimism in European debt markets ahead of the ECB and summit and a willingness to run with Merkel and Sarkozy’s latest plans,” said Sean Callow, a Sydney-based senior currency strategist at Westpac Banking Corp., Australia’s second-largest lender. “The euro will stabilize and may rise a bit as there are signs the ECB will not only cut rates but will also unveil fresh steps to boost liquidity.”
The euro traded at 104.25 yen as of 8:26 a.m. in Tokyo from 104.27 yen in New York yesterday, when it fell 0.2 percent. The common currency fetched $1.3396 from $1.3401. The dollar was little changed at 77.83 yen. Australia’s dollar bought $1.0261 from $1.0271.
Merkel and Sarkozy said that Europe’s two biggest economies were aligned on backing automatic penalties for deficit violators and locking limits on debt into euro states’ constitutions. The French leader said they aimed to reach consensus on the changes required by March.
‘As Fast as Possible’
Gains in the euro were limited after Standard & Poor’s yesterday put 15 euro-zone nations on watch for a credit downgrade. Germany, France, Netherlands, Austria, Finland and Luxembourg, the euro area’s six AAA rated countries, are among the nations on “CreditWatch negative,” pending the result of the summit of EU leaders, S&P said.
“We don’t have time -- we are conscious of the gravity of the situation,” Sarkozy said after the two met over lunch at the Elysee palace in Paris. “We want to go as fast as possible based on this agreement between France and Germany, which is open to others.”
ECB President Mario Draghi signaled Dec. 1 that the central bank could do more to fight the crisis as long as governments push the euro area toward a fiscal union.
“A new fiscal compact” is “definitely the most important element to start restoring credibility,” Draghi said. “Other elements might follow, but the sequencing matters. It is first and foremost important to get a commonly shared fiscal compact right.” Draghi didn’t specify what more the ECB could do and said the central bank’s bond purchases “can only be limited.”
Policy makers are forecast to lower Europe’s benchmark rate to 1 percent from 1.25 percent this week, according to the median estimate of 57 economists surveyed by Bloomberg News.
Reserve Bank of Australia Governor Glenn Stevens will reduce the key rate by 25 basis points to 4.25 percent, according to 13 of 25 economists in a separate poll.
To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
