NEW YORK—Unfolding optimism about Greece and encouraging Italian bond auctions Friday sent the euro to multimonth highs against the dollar and yen, as much of the gloom that has recently shrouded the single currency lifted momentarily.
After securing an 11th-hour bailout package worth €130 billion earlier this week, Athens launched a bond-swap offer to private-sector creditors Friday. The €100 billion debt write-down plan is designed to extricate the Hellenic republic from a crushing debt load, helping to bring closure to the uncertainty that has battered European bond markets for more than two years.
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Although skepticism has dogged Greece's restructuring and budget-cutting efforts, the measures have proven sufficient to send the euro rallying by five cents in the past week alone. The single currency extended those gains after Italy successfully auctioned short-term debt at lower borrowing costs, reassuring investors that Greece's woes have stopped putting upward pressure on other distressed European bond markets.
"The uncertainties for Europe and the global economy are fading, so bearish positions in the euro and associated currencies are being unwound," said David Watt, senior currency strategist at RBC Capital Markets. Investors are now being forced to scale back on bets the euro would fall simply because "the market has been so fulsomely bearish the euro."
Better-than-expected U.S. housing and consumer-sentiment data helped spark appetite for higher-yielding stocks and currencies, which propelled the euro to its highest level since Dec. 2 against the dollar and its strongest level since Oct. 31 against Japan's currency.
Late Friday, the euro was at $1.3449 from $1.3371 late Thursday, after hitting $1.3487 earlier. The dollar was at ¥81.20 from ¥80, while the euro was at ¥109.20 from ¥106.97 after hitting ¥109.24 earlier. The U.K. pound was at $1.5878 from $1.5743. The dollar was at 0.8961 Swiss franc from 0.9015 franc.
The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 78.360 from 78.819 Thursday.
The European Central Bank is scheduled to launch a second liquidity operation next week to bolster the banking system, which is also boosting optimism. The ECB's last operation in December was considered a success.
Meanwhile, traders have jettisoned the yen ever since the Bank of Japan surprised markets on Feb. 14 with an expansion of its bond buying designed to stimulate the economy. On Friday, the currency continued to reel as investors—encouraged by improving conditions in the global economy—pared back on safe-haven buying of the currency.
"To the extent that the improved conditions in risk appetite can be maintained, it can continue to work against the yen," HSBC strategist Robert Lynch noted.
