BLBG:Euro Strengthens After Greek Says Debt Talks Progressing; Dollar Declines
The euro strengthened against the dollar, snapping its biggest decline in two weeks, after Greek Prime Minister Lucas Papademos said progress had been made in debt-swap talks with bondholders.
The 17-nation currency rose for the first time in four days versus the yen after European chiefs meeting in Brussels agreed to accelerate the introduction of a permanent 500 billion-euro ($659 billion) rescue fund and signed a deficit-control treaty. The dollar weakened as stock gains sapped demand for safer investments. The yen climbed to a three-month high against the greenback, fueling speculation Japan’s government will take action to curb the currency’s advance.
“We’ve seen a bounce in the euro and the risk environment is looking a little a bit firmer,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “It doesn’t look as though we’ve ended up with a summit with a great degree of rancor, but I don’t think we’ve seen enough for the euro’s rally to be sustained for much longer.”
The euro gained 0.3 percent to $1.3181 at 8:34 a.m. London time after falling 0.6 percent yesterday, the biggest decline since Jan. 13. The shared currency climbed 0.2 percent to 100.51 yen. The dollar dropped 0.1 percent to 76.26 yen after sliding to 76.18 yen, the weakest level since Oct. 31.
The euro is headed for its first monthly advance versus the dollar and the yen since October. The shared currency has appreciated 1.7 percent versus the greenback, and risen 0.8 percent against the yen.
Greece ‘Committed’
Papademos said he’s “strongly committed” to reaching a debt-swap agreement with Greece’s creditors. Representatives of the European Commission, the European Central Bank and the International Monetary Fund want more fiscal tightening and wage cuts from Greece, the prime minister told reporters after a European Union summit in Brussels.
“The news that a Greek deal is around the corner has been enough to squeeze any short positions put on overnight in the euro against the dollar,” said Jesper Bargmann, regional head of spot trading for major currencies in Singapore at Royal Bank of Scotland Plc. Short positions are bets an asset will decline.
The dollar weakened as the Stoxx Europe 600 Index (SXXP) of shares gained 0.6 percent, and futures on the Standard & Poor’s 500 Index (SXXP) advanced 0.4 percent.
The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the currency against those of six U.S. trading partners, fell 0.3 percent to 78.92. The gauge dropped to 78.772 on Jan. 27, the lowest since Dec. 12.
Fed Pledge
The greenback has weakened against all its 16 major counterparts this month as the Federal Reserve extended its pledge last week to keep interest rates low through at least late 2014. Chairman Ben S. Bernanke signaled on Jan. 25 the central bank is considering a third round of asset purchases, or quantitative easing, to cap borrowing costs and spur growth.
The Conference Board’s index of U.S. consumer confidence rose to 68 this month, the highest since February 2011, according to a Bloomberg News survey before today’s report.
“We may see an increase in the attractiveness of U.S. dollars if the consumer confidence survey comes in better than expected,” said Kara Ordway, a foreign-exchange strategist at City Index Asia Pacific in Sydney. “It might ease speculation that QE3 might be in the pipeline.”
Japan’s Finance Minister Jun Azumi said his ministry is prepared to take “decisive” measures to curb the yen’s appreciation as it approached a post-World War II high.
The ministry will today release its month-end data for foreign-exchange market operations and will report daily figures within seven days for the period of October to December. Japan sold yen on Oct. 31 when the currency climbed to a postwar record of 75.35 per dollar.
“The Ministry of Finance data may confirm that Japan did some hidden intervention,” said Daisaku Ueno, a foreign- currency strategist in Tokyo at UBS AG. “Should that be the case, we’ll see a change in the effectiveness of Azumi’s verbal intervention.”
To contact the reporters on this story: David Goodman in London at dgoodman28@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
