The euro strengthened for a fifth day versus the dollar on speculation European Union finance ministers meeting in Brussels will make further progress in their efforts to stem the debt crisis.
The 17-nation currency rose to a six-week high against the greenback after the officials said they were confident Greece’s bond buyback announced yesterday will be successful. The dollar fell for a second day versus the yen as President Barack Obama is scheduled for a television interview at 12:30 p.m. to discuss the so-called fiscal cliff of spending cuts and tax increases.
“There’s a bit more constructiveness out to the Eurozone,” Brian Kim, a currency strategist at Royal Bank of Scotland Group Plc in Stamford, Connecticut, said in a telephone interview. “Currency markets could be subject to more headline trading, at least in this day ahead.”
The euro gained 0.3 percent to $1.3091 at 9:05 a.m. in New York after rising to $1.3107, the highest level since Oct. 18. The shared currency dropped 0.2 percent to 107.17 yen. The dollar fell 0.5 percent to 81.86 yen.
Brazil’s real rose 0.7 percent to 2.1098 per dollar after the central bank intervened yesterday to bolster the currency. The nation’s swap rates fell for a third day as industrial production expanded in October less than forecast, adding to speculation borrowing costs will stay at record lows through the first half of 2013.
Further gains in the euro may be limited as the 14-day relative strength index versus the dollar rose to 70.2. A reading higher than 70 indicates a currency’s rally may have been too far, too fast and may be due for a correction.
EU finance ministers meeting in the Belgian capital will discuss setting up a common bank supervisor. Greece yesterday offered to spend as much as 10 billion euros to buy back bonds. French Finance Minister Pierre Moscovici said the operation “seems to be happening under satisfactory conditions.”
Spain’s Economy Ministry said yesterday that the nation would receive 37 billion euros next week to recapitalize four of its banks.
“We’re in a period of stability for the euro, which global policy makers’ actions have helped to restore,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The Greek buyback has helped to reinforce the tightening in euro-zone sovereign-credit risk premiums we’ve seen over the past couple of weeks.”
Italian 10-year bond yields fell to 4.42 percent, the sixth-straight daily decline and the lowest level since 2010. Spain’s similar-maturity bond yield dropped to 5.2 percent, the third-straight decline.
The Dollar Index dropped to a five-week low as House Republicans rejected Obama’s demand for higher tax rates and countered with a $2.2 trillion deficit-cutting plan. The proposal seeks $800 billion in tax revenue in the next decade and would slow growth in Social Security payments.
The two sides remain far apart with about four weeks left before more than $600 billion in tax increases and federal spending cuts start taking effect in January, possibly triggering a recession.
“The dollar is looking a little tired,” said Kumiko Gervaise, an analyst at Gaitame.com Research Institute Ltd. in Tokyo. “If the market starts to pay more attention on the negative factors for the U.S., such as the deadlock in fiscal cliff negotiations, the dollar would be sold.”
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, fell 0.3 percent to 79.657 after sliding to the lowest since Oct. 23.
The Swiss franc fell as Credit Suisse Group AG was said to be imposing negative interest rates of up to minus 1 percent on cash balances held by financial institutions.
The Swiss currency weakened versus all its 16 major counterparts after three people with knowledge of the matter said Credit Suisse will set negative interest rates on the cash balances of its financial-institutional clients held in francs at as much as minus 1 percent.
Marc Dosch, a spokesman for the Zurich-based bank, said the rates are being set for each client individually. “We invite our customers to keep cash balances as low as possible to avoid negative credit charges,” according to a notice confirmed by Credit Suisse yesterday.
The franc fell 0.4 percent to 1.2134 per euro after depreciating to the weakest since Sept. 18.
Australia’s dollar rose versus all except one its major peers as investors looked past an interest-rate cut by the central bank, which said demand from outside the mining industry may increase.
The Reserve Bank of Australia lowered its overnight cash- rate target to 3 percent from 3.25 percent, a decision predicted by 20 of 28 economists surveyed by Bloomberg.
“People are itching to call the RBA done for now, and you can probably pull parts of today’s statement that would strengthen that argument,” said Michael Turner, a fixed-income strategist in Sydney at Royal Bank of Canada. “The Aussie, on a rate-differential argument, should be well-supported.”
The so-called Aussie appreciated 0.6 percent to $1.0478.