Euro Rises Versus Dollar on Speculation Progress Being Made Before Summit
Euro Declines as Moody’s Says France’s Rating Under Pressure
Chris Ratcliffe/Bloomberg
The euro fell after Moody’s said yesterday that France’s Aaa credit rating is under threat from worsening debt metrics and the potential for additional liabilities from the regional crisis.
The euro fell after Moody’s said yesterday that France’s Aaa credit rating is under threat from worsening debt metrics and the potential for additional liabilities from the regional crisis. Photographer: Chris Ratcliffe/Bloomberg
The euro rose against the dollar on speculation European leaders will agree on measures to ease sovereign-debt turmoil at an Oct. 23 summit.
The 17-nation currency erased losses after the Guardian reported that Germany and France support boosting the region’s rescue fund to 2 trillion euros ($2.8 trillion). A spokesman for German Chancellor Angela Merkel declined to comment. The dollar fell against the Australian and Canadian currencies as stocks and commodities rallied, damping demand for a refuge.
“Any sign that France and Germany are working together for a 2 trillion euro rescue fund is certainly bullish equities, bullish the euro,” said Greg Salvaggio, senior vice president of capital markets at the currency trader Tempus Consulting Inc. in Washington. “Europe couldn’t get its act together, and now it appears to be getting its act together substantially.”
The euro appreciated 0.2 percent to $1.3758 at 4:18 p.m. in New York after earlier rising 0.6 percent. The euro gained 0.2 percent to 105.74 yen. Japan’s currency was little changed at 76.86 versus the dollar after advancing 0.3 percent.
Japan’s currency erased its gain versus the dollar after the Nikkei newspaper reported that the government and central bank will form a team of senior officials to oversee steps designed to address the currency’s strength.
The yen rallied to a post-World War II high of 75.95 against the dollar in August, making Japan’s exports more expensive. It gained even after the government intervened in the currency market for the third time in the past year, selling the yen in an effort to curb its appreciation.
Boost in Aussie
The dollar fell 1.2 percent to $1.0279 per Australian dollar and slid 1 percent to C$1.0136 against the Canadian currency today as stocks and commodities advanced.
The Standard & Poor’s 500 Index rose 2 percent after dropping as much as 0.8 percent. The S&P GSCI Total Return Index of 24 raw materials increased 0.6 percent as crude oil for November delivery surged 2.3 percent to $88.29 a barrel.
Global demand for U.S. stocks, bonds and other financial assets was greater than forecast in August, the Treasury Department reported. Net buying of long-term equities, notes and bonds totaled $57.9 billion during the month, compared with net buying of $9.1 billion in July.
The euro advanced versus the dollar as the Guardian reported that the two biggest economies in the currency area agreed before the weekend summit to an increase in the 440-billion euro European Financial Stability Facility.
Support for Banks
Germany and France have also supported recapitalizing the region’s banks to meet a 9 percent capital ratio that may be required by the European Banking Authority, the newspaper said.
The euro fell earlier after Moody’s Investors Service said yesterday France’s Aaa credit rating is under threat from worsening debt metrics and the potential for additional liabilities from the regional debt crisis. France’s 10-year notes trail those of Greece, Belgium and Ireland this quarter.
Merkel said today that the European Union summit will mark an important step, though not the final one, in solving the euro-area debt crisis.
Debt has built up over decades, and the summit will produce a “clear commitment” to the euro by the region’s leaders, Merkel told reporters in Berlin after a meeting with Uruguayan President Jose Alberto Mujica.
Dashed ‘Dreams’
Europe’s currency dropped yesterday as a Merkel spokesman knocked down what it called “dreams” that the Oct. 23 summit would resolve the debt crisis. Christian Noyer, head of France’s central bank, ruled out a ramping up of the European Central Bank’s bond-buying program to help shield countries such as Italy and Spain from contagion.
“Everything seems hinged on what happens in Europe,” said Jessica Hoversen, an analyst at the futures broker MF Global Holdings Ltd. in New York. “The market is uncertain and concerned. It has become very binary in these periods of elevated stress.”
Among Group-of-10 currencies, the Australian dollar will come under the most pressure against its U.S. counterpart as the rally in higher-yielding assets reverses, according to Brown Brothers Harriman & Co.
Strong domestic economic fundamentals will not support a “screamingly overvalued” Australian dollar, Mark McCormick, a currency strategist at Brown Brothers in New York, said in a telephone interview.
The Aussie’s price is further above its 20-day moving average than any other G-10 currency, according to McCormick. It’s followed by the New Zealand dollar.
Asian currencies dropped today as growth in China’s gross domestic product slowed to 9.1 percent in the third quarter from a year earlier after an expansion of 9.5 percent in the prior three months.
South Korea’s won dropped 0.5 percent to 1,145.65 per dollar, and the Malaysian ringgit fell 1.1 percent against the greenback to 3.1353.
To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
Rate this Page