Euro, 7-week highs by euphoria of EU pact

| October 28, 2011

The euro hit a seven-week high against the dollar on Thursday after an agreement to tackle the debt crisis in the euro area investors took off bets against the common currency despite still waiting for more details covenant.

The dollar, which this week hit a series of lows against the yen, marked a new low Thursday as investors continue testing the determination of the Japanese authorities, who have spoken twice this year to contain the strength of its currency.

The leaders of the European Union and the banks reached an agreement for 50 percent off Greece’s debt in the hands of private holders, and decided to recapitalize the banks in Europe and reinforce the rescue fund of 440,000 euro million euros (600,000 million).

The common currency barrier pierced orders and stop loss levels in its way upward, investors react positively to the events in Europe.

The euro had a second jerk when a report showed the U.S. economy grew at its fastest pace in the year in the third quarter, as consumers and investors put aside their fears about the recovery and increased spending, creating an environment that could boost the economy in the last three months of the year.

“Although the plan to shore up banks and eliminate the threat of contagion does little to address the structural problems facing the region, the package will allow the Europeans to buy time while avoiding an imminent default,” said Michael Boutros, analyst coins in New York.

“The concerns have eased and investors looking for profitable return,” he said.

The euro appreciated by 2.3 percent to $ 1.4213, after rising up to $ 1.4219.

Although the European rescue fund EFSF be leveraged four or five times to about 1 billion euros, is not expected to Finance Ministers of the EU to reach agreement until November about the details about how it will work the bottom.

It is expected that the euro’s gains extend to next week, at least until the meeting of the ECB, where investors expect the European Central Bank could at least signal that interest rates will fall.

Against the yen, the euro was trading up 1.4 percent to 107.43 yen.

The high-yielding currencies also rose, where the Australian dollar climbed 2.8 percent to a maximum of eight weeks.

The general weakness of the dollar sent the greenback to a seven-week low against the Swiss franc, the lowest level since the Swiss National Bank announced a floor for the currency Helvetica.

While it is considered that the package approved by the European summit will prevent a catastrophe in the financial markets in the euro area in the short term, doubts remain whether it could improve the growth prospects of the region.

The dollar, meanwhile, fell to another record high against the yen floor after the Bank of Japan, as widely expected, decided to ease monetary policy by expanding its asset purchases by 5 trillion yen (65,800 million) to carry to 20 trillion yen.

The dollar was down 0.5 percent at 75.84 yen in operations of the electronic platform EBS minimum after touching 75.661 yen, a record low.

Category: Business News

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