The euro rose to the strongest in more than seven months against the dollar on speculation U.S. lawmakers will reach a budget pact to avert pushing the economy over the so-called fiscal cliff and into recession.
The euro gained against major counterparts as Standard & Poor’s lifted Greece’s credit rating from selective default. The yen fell for a sixth day against the euro before the Bank of Japan starts a two-day meeting, with newly elected Prime Minister Shinzo Abe pressing policy makers to increase stimulus. Sweden’s krona jumped after the central bank signaled it probably won’t cut interest rates next year, even as it lowered its benchmark today.
“All the movements today are tied to the cliff,” said Fabian Eliasson, head of U.S. currency sales at Mizuho Financial Group Inc. in New York. “The markets are acting as if something is going to get done and maybe this week.”
The euro added 0.4 percent to $1.3228 at 3:35 p.m. New York time, after reaching the highest level since May 2. The shared currency was up 0.8 percent to 111.32 yen. Japan’s currency fell 0.4 percent to 84.21 per dollar, after falling yesterday to the lowest since April 12, 2011.
The implied volatility of Group of Seven currencies fell to the lowest level in five years, according to a JPMorgan Chase & Co. index. The measure slid to 7.06 percent, the least since August 2007.
The Dollar Index, which tracks the U.S. currency against those of six trading partners, fell 0.3 percent to 79.349 after dropping to the lowest since Oct. 18. There was reduced demand for the safety of Treasuries amid speculation U.S. lawmakers will agree on a way to avoid the so-called fiscal cliff.
House Speaker John Boehner will continue to negotiate with President Barack Obama today, and push a “Plan B” to the president’s proposed budget offer that would raise taxes by $1.2 trillion and boost tax rates for households earning more than $400,000 a year, a Republican aide said.
White House spokesman Jay Carney said Boehner’s plan isn’t balanced and can’t pass the Democratic-controlled Senate. “The president is hopeful that both sides can work out remaining differences and reach a solution,” Carney said in a statement.
The krona strengthened 0.4 percent to 8.7316 per euro, and climbed 0.8 percent to 6.6039 per dollar after the Stockholm- based Riksbank suggested it doesn’t expect to cut borrowing costs next year.