By - Jan 13, 2011 5:04 PM GMT+0800
Jan. 10 (Bloomberg) -- Nick Bennenbroek, head of currency strategy at Wells Fargo & Co., talks about the outlook for the dollar and currency markets. Bennenbroek predicts the dollar will have about a 5 percent gain against the euro over the year and 11 percent versus the yen. He speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
The euro reached a one-week high against the dollar amid optimism European leaders may take action to quell the region’s debt crisis, underpinning the appeal of the region’s assets.
The 17-nation currency held a three-day advance amid speculation finance ministers meeting next week may increase the size of aid reserves and lower rates on bailout loans. Spain and Italy are due to sell bonds today after Portugal auctioned debt yesterday, and European Central Bank policy makers are meeting in Frankfurt. The franc fell against its 16 most-traded peers after Swiss central bank Vice President Thomas Jordansaid the currency’s renewed ascent is posing a threat to growth.
“This chatter of action is probably going to provide some degree of support for the euro, assuming the auctions go okay today,” said Steve Barrow, head of research for Group of 10 currencies at Standard Bank Plc in London. “The market is minded to sell the Swiss franc in this less risk-averse environment.”
The euro rose 0.1 percent to $1.3149 as of 9:02 a.m. in London, the highest since Jan. 6., after jumping 1.2 percent yesterday, the most in a month. Against the yen, the euro rose 0.2 percent to 109.24.
Europe’s single currency appreciated 1.1 percent to 1.2829 Swiss francs. The franc weakened 1 percent to 97.58 centimes per U.S. dollar.
Merkel View
The euro rose the most against the yen in six weeks yesterday as German Chancellor Angela Merkel expressed her willingness to take whatever steps are necessary to stem the debt crisis.
“We’re saying what we’ve always said since the Greek crisis: we will stand by the euro,” she said yesterday.
Merkel was responding to remarks made by European Union Economic and Monetary Affairs Commissioner Olli Rehn, in which he called for a “comprehensive” plan to contain the sovereign- debt crisis. His proposals included an expansion of the “size and scope” of the EU’s 440 billion-euro ($577 billion) rescue fund, the European Financial Stability Facility.
Spain will today auction as much as 3 billion euros of bonds due in 2016, while Italy will sell as much as 6 billion euros of securities maturing in 2026 and 2015.
Portugal yesterday sold 599 million euros of bonds due in 2020 at a yield of 6.716 percent, compared with 6.806 percent at the previous auction Nov. 10.
SNB Comments
The franc reached its weakest level against the euro since Dec. 16. It was the worst performer against both the dollar and euro among major currencies.
The currency’s gains are posing an “extraordinary challenge” for some exporters, Jordan said at an event in Reichenau, Switzerland, late yesterday. “Volatility has strongly increased” because of the European debt crisis, and Switzerland has “an enormous interest for Europe to solve its debt problems.”
He refused to say whether the bank is considering a renewed round of foreign-currency purchases to weaken the franc. SNB spokesman Nicolas Haymoz declined to comment on the franc’s moves today.
The Swiss central bank spent more than a year intervening in currency markets to weaken the franc and head off deflation risks before abandoning that policy in June 2010.
To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net.
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.
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