Euro gains a 2nd day amid Spanish bailout optimism; yen slides

Markets Watching

“There is some buying of the euro as investors speculated the S&P downgrade may hasten Spain’s request for a bailout,” said Noriaki Murao, New York-based managing director of the marketing group at the Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest financial group by market value. “The markets will be watching if any progress is made at the EU summit on both the Spanish and Greek situations.”

The euro gained against most of its 16 major peers as the EU’s statistics office in Luxembourg said industrial output in the currency bloc unexpectedly increased 0.6 percent in August from July, when it also gained 0.6 percent.

The Thomson Reuters/University of Michigan sentiment index was at 78 in October, according to the median forecast of 71 analysts in a Bloomberg News survey. That would be little changed from September’s final reading of 78.3.

Hurting Economy

Japanese Finance Minister Koriki Jojima said yesterday he told his Group of Seven counterparts the strength of the yen is hurting the nation’s economy and that countries should cooperate on foreign exchange if necessary. A stronger yen makes Japanese products pricier overseas and erodes domestic exporters’ earnings when repatriated.

The yen touched 77.95 per dollar yesterday, the strongest level since Oct. 1. The Japanese currency has appreciated 3.6 percent over the past six months, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation- Weighted Indexes. The euro fell 1.7 percent and the dollar was little changed.

Singapore’s dollar climbed against most major counterparts. The city-state’s central bank unexpectedly announced today that it would leave monetary policy unchanged, as inflation risks trump worries over a shrinking economy.

‘Appropriate’ Policy

“This policy stance is assessed to be appropriate in containing inflationary pressures and keeping the economy on a path of restructuring toward sustainable growth,” the Monetary Authority of Singapore said today in a statement following its semi-annual exchange-rate review.

There will be no change to the slope and width of the local currency’s trading band that the MAS uses as its main policy tool, the bank said. The level at which it is centered will also remain unchanged, the MAS said.

The Singapore dollar strengthened 0.5 percent to S$1.2213 versus its U.S. counterpart. It has advanced 6.2 percent this year, the best performance after the Mexican peso among the greenback’s major peers.

Bloomberg News

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