SF: Euro Snaps Three-Day Decline Against Yen Before European Summit
Dec. 7 (Bloomberg) -- The euro ended a three-day drop versus the yen amid speculation Europe is working to expand funds available to the region's most-indebted nations as leaders prepare to meet in Brussels tomorrow on the credit crisis.
The 17-nation euro yesterday erased losses versus the dollar after the Financial Times reported that Europe may combine temporary and planned permanent rescue facilities to increase its anti-crisis resources. The European Central Bank is forecast to cut interest rates tomorrow. Australia's dollar halted yesterday's decline against the greenback before a report that economists said will show gross domestic product grew.
"Ahead of the summit, we are seeing a certain expectation in the overall market that the European policy makers will take a step forward to resolve the debt crisis," said Kengo Suzuki, manager of the foreign-bond department in Tokyo at Mizuho Securities Co., a unit of Japan's third-biggest listed bank. "That's giving some support to the euro."
The euro traded at 104.27 yen as of 8:39 a.m. in Tokyo from 104.17 yen in New York yesterday, when it fell 0.1 percent. The common currency fetched $1.3409 from $1.3402. The dollar was little changed at 77.76 yen.
U.S. Treasury Secretary Timothy F. Geithner yesterday backed a German-French push for closer European cooperation, urging policy makers to work with central banks to erect a "stronger firewall" to end the crisis. He welcomed "progress toward a fiscal compact for the euro zone," echoing language used last week by ECB President Mario Draghi.
Rescue Funds
Operating the European Stability Mechanism in combination with the 440 billion-euro ($590 billion) temporary fund next year would potentially boost Europe's anti-crisis resources to 940 billion euros. There were negotiations over pairing the two funds, according to two people familiar with the discussions, Bloomberg News reported on Oct. 20.
The ECB will reduce its benchmark rate to 1 percent from 1.25 percent on Dec. 8, according to the median estimate of 58 economists surveyed by Bloomberg.
ECB Governing Council member Ewald Nowotny said this week that the central bank is observing liquidity shortages in the banking sector and can do more to supply funds.
Australia's third-quarter gross domestic product increased 0.8 percent from the previous three months, when it rose 1.2 percent, a Bureau of Statistics report is forecast to show today, according to the median estimate in a separate Bloomberg survey.
