Euro gains beyond $1.30 on speculation Spain will request aid

The euro rose above $1.30 for the first time in a week as German investor sentiment improved more than economists predicted and amid speculation that Spain is moving toward asking for financial assistance.

Europe’s 17-nation currency strengthened for a fourth day versus the yen as Spain’s government bonds rose after Germany was said by two senior coalition lawmakers to be open to providing the a precautionary credit line from Europe’s rescue fund. The dollar and the yen fell against most of their major counterparts before a U.S. report that economists project will show improvement in industrial production, damping demand for the safest assets. The pound fell against the euro as U.K. inflation slowed to the least in almost three years.

“There’s a lot of news going around this morning suggesting that there will be some kind of help in the very near future for Spain,” Charles St-Arnaud, a foreign-exchange strategist at Nomura Holdings Inc. in New York, said in a telephone interview. “That’s helping the euro.”

The euro climbed 0.8 percent to $1.3055 at 8:31 a.m. New York time, after reaching $1.3059, the strongest level since Oct. 5. Against Japan’s currency, it gained 1.2 percent to 103.08. The yen slipped 0.4 percent to 78.93 per dollar.

Europe’s common currency has gained 0.8 percent in the past week, trailing behind the Swiss franc and Sweden’s krona among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. That cut its decline this year to 1.8 percent. The yen has fallen 5.3 percent in 2012.

German Confidence

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, climbed to minus 11.5 from minus 18.2 in September. Economists forecast an increase to minus 14.9, according to the median of 36 estimates in a Bloomberg News survey.

Spain will wait for European partners to settle issues over the sequencing of a bailout request and its consequences for Italy, the Financial Times reported today, citing a senior economy ministry official.

“The better the chances of a bailout for Spain, the more risk-on that is,” said Neil Jones, the head of European hedge- fund sales at Mizuho Corporate Bank Ltd. in London. “You’ve got a market that’s not really prepared for the upside or risk on, so the positions that are out there are designed to hedge against euro catastrophe.”

Dollar Index

The Dollar Index, which measures the currency against the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, declined 0.5 percent to 79.332.

U.S. industrial production increased 0.2 percent in September from the previous month, when it fell 1.2 percent, according to the median estimate of 85 economists surveyed by Bloomberg News before the Federal Reserve releases the figures today.

Fed Bank of St. Louis President James Bullard said U.S. growth will pick up next year.

“I still think it is reasonable to expect faster growth as we go forward,” Bullard said in a speech in St. Louis yesterday. “The normal expectation would be the effects start to dissipate” from headwinds that have included the European debt crisis and the slow housing recovery, he said.

The pound slipped 0.5 percent to 80.95 pence per euro. U.K. consumer prices rose 2.2 percent from a year earlier, the least since November 2009 and down from a 2.5 percent gain in August, the Office for National Statistics said in London.

New Zealand’s dollar slid against its 16 major counterparts after a report showed consumer prices grew at the slowest pace in more than 12 years. The so-called kiwi, dropped 0.5 percent to 81.45 U.S. cents.

Consumer prices in New Zealand rose 0.8 percent in the third quarter from a year earlier, the country’s statistics bureau said in Wellington today. The result was the lowest since the fourth quarter of 1999.

Bloomberg News

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