Euro near 4-week high on recapitalisation plan

Demand for common currency gained as Slovakia may approve Europe's enhanced bailout fund
Euro near 4-week high on recapitalisation plan
The euro has climbed 1.8 percent over the past month
By Bloomberg
Thu 13 Oct 2011 08:44 AM

The euro was 0.4 percent from an almost four-week high before European Commission President Jose Barroso speaks in Brussels after calling on Wednesday for a “coordinated approach” to recapitalise the region’s banks.

Demand for the common currency was bolstered as Slovakia is set to approve Europe’s enhanced bailout fund on Thursday or Friday, completing the ratification process across the 17 euro countries. Australia’s dollar gained against the greenback after a report showed the jobless rate fell for the first time since March as employers added more jobs than forecast. The yen rallied from its weakest level in a month against the dollar on speculation Japan’s exporters bought their currency.

“There’s certainly mounting optimism there is a greater urgency from policy makers to bolster the European financial system by things like the recapitalisation of the banking system,” said John Horner, a currency strategist at Deutsche Bank AG in Sydney. “That should help support euro.”

The euro traded at $1.3781 as of 11:35 am in Tokyo from $1.3791 in New York on Wednesday, when it rose as high as $1.3834, the strongest since Sept. 16. The currency fell 0.3 percent to 106.25 yen. It reached 107.05 yen on Wednesday, the most since Sept. 9. The dollar lost 0.2 percent to 77.09 yen after touching 77.49 on Wednesday, the most since Sept. 12.

“There’s talk of exporters buying the yen,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “Their purchases are probably related to the Japanese currency’s weakness versus the dollar and the euro” on Wednesday.

Barroso on Wednesday called for a reinforcement of crisis-hit banks, the payout of a sixth loan to Greece and a faster start for a permanent rescue fund to master Europe’s debt crisis. An Oct. 23 summit of euro leaders looms as a deadline for a breakthrough in combating the crisis.

Currencies such as the Australian and New Zealand dollars may appreciate more than the euro until greater detail emerges on how Europe will implement any plan to insulate its banks from the region’s debt woes, Deutsche Bank’s Horner said.

The US will intensify its call for forceful action from Europe at a meeting of Group of 20 nations in Paris this week, Lael Brainard, the Treasury undersecretary for international affairs, said on Wednesday. Treasury Secretary Timothy F. Geithner will attend the G-20 finance ministers meeting beginning today.

The euro has climbed 1.8 percent over the past month, the joint best performer with the Swedish krona among 10 developed market currencies tracked by Bloomberg Correlation-Weighted Currency Indexes.

The yen reached its weakest level in a month against its US and European counterparts on Wednesday as talk of a yen peg to the dollar weakened the currency, according to Tony Allen, global head of foreign-exchange trading in Sydney at Australia & New Zealand Banking Group Ltd. Today’s move “is people taking profit,” he said.

Japan on Aug. 4 sold the yen to stem its advance. The Swiss National Bank on Sept. 6 set a minimum exchange rate of 1.20 francs per euro and said it will defend the target with the “utmost determination” if needed.

The Bank of Japan’s members “shared the view that it was appropriate for the time being to steadily implement the purchase of financial assets and monitor the spread of its effects,” according to a record of the bank’s Sept. 6-7 meeting published today.

Japan’s central bank bolstered in August an asset-buying fund to 15 trillion yen ($195 billion) from 10 trillion yen, while leaving its target interest rate near zero percent.

Australia’s dollar gained for a second day against the US currency after the statistics bureau in Sydney said the number of people employed rose by 20,400, from a revised 10,500 drop in August. That was more than twice the median estimate for a 10,000-job gain in a Bloomberg News survey of economists. The jobless rate fell to 5.2 percent from 5.3 percent.

The so-called Aussie rose 0.3 percent to $1.0184.

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