Euro Near 6-Week High; Merkel Shows Support for ECB Plan

By Sharon Chen and Kristine Aquino - Aug 17, 2012 9:29 AM GMT+0800

 

The euro traded 0.2 percent from a six-week high versus the yen as Germany signaled its support for a European Central Bank approach to resolve the debt crisis.

The shared currency is set to complete five-day gains against all 16 of its major counterparts before meetings of German Chancellor Angela Merkel, French President Francois Hollande and Greek Prime Minister Antonis Samaras from Aug. 23-24. The yen was poised for its biggest weekly loss in almost two months versus the dollar as the extra yield investors receive from U.S. securities over Japanese debt climbed.
“We’re starting to see the early signs of some real progress being made in the euro area,” said Andrew Salter, a currency strategist in Sydney at Australia & New Zealand Banking Group Ltd. (ANZ) “We do see the euro rebounding modestly over the next few months.”

The euro traded at 97.98 yen as of 10:26 a.m. in Tokyo from 98.04 yesterday, when it touched 98.18, the most since July 6. It was little changed at $1.2355 after rising 0.5 percent to $1.2356 in New York. Japan’s currency was at 79.30 per dollar from 79.35. The euro is set to gain 0.6 percent against the dollar this week, the most since the period ended July 27. The yen headed for a 1.3 percent loss versus the dollar, its biggest drop since the five days ended June 22.

Merkel is due to host Hollande Aug. 23, Paris-based Agence France-Presse reported, one day before Samaras visits Berlin for talks. Italian media reported that Prime Minister Mario Monti is due in the German capital on Aug. 29, while Spanish Prime Minister Mariano Rajoy has said that Merkel will visit Madrid on Sept. 6.

‘Right Track’

“Obviously time is pressing” on stamping out the debt crisis, though “on many of these issues we feel we’re on the right track,” Merkel told reporters in Ottawa yesterday at a joint press conference with Canadian Prime Minister Stephen Harper. Euro-area policy makers “feel committed to do everything we can to maintain the common currency.”

The euro and Swiss franc slid 4.6 percent over the past three months, the worst performances among the 10 developed- market currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen and dollar fell 1.7 percent.

The difference between yields on two-year U.S. Treasuries and similar maturity Japanese government bonds was 19 basis points yesterday, the most since July 4. Five-year U.S. government debt offered a premium of 56 basis points today over comparable JGBs, up from this year’s low of 36 basis points.


Sales of existing U.S. homes probably rose to a 4.5 million annual rate in July from a 4.37 million pace in June, according to the median estimate of economists surveyed by Bloomberg News before a report by the National Association of Realtors due Aug. 22. Housing starts fell 1.1 percent to a 746,000 annual rate last month from June’s 754,000 pace, Commerce Department figures showed yesterday.
To contact the reporters on this story: Sharon Chen in Singapore at schen462@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net