The euro advanced to a one-month high on speculation Spain will move toward seeking financial assistance, helping contain Europe’s debt crisis.
The 17-nation currency rose versus most major counterparts after Moody’s Investors Service held Spain’s credit rating at investment grade and as European Union leaders prepare for a summit in Brussels this week. The dollar slid against most of its major peers before data that may show new housing construction in the U.S. climbed last month, curbing demand for safer assets. Australia’s currency reached a two-week high as Asian stocks extended gains in equities worldwide.
“The euro is rising amid speculation Spain will request a precautionary credit line,” said Masato Yanagiya, head of currency and money trading in New York at Sumitomo Mitsui Banking Corp. “Expectations are rising before the EU summit.”
The euro gained 0.3 percent to $1.30.93 at 12:20 p.m. in Tokyo after touching $1.3124, the highest since Sept. 17. It reached 103.52 yen, the most since Sept. 19, before trading at 102.96. The dollar fell 0.3 percent to 78.63 yen.
The MSCI Asia Pacific Index (MXAP) of shares rose 1 percent following a 1 percent advance in the Standard & Poor’s 500 Index in New York. The Stoxx Europe 600 Index gained 1.3 percent.
Germany is open to Spain seeking a precautionary credit line from Europe’s rescue fund, two senior coalition lawmakers said yesterday. The comments by Michael Meister, a deputy caucus leader of Chancellor Angela Merkel’s Christian Democratic bloc, and Norbert Barthle, her party’s budget spokesman, indicate a rolling back of German resistance to a full sovereign bailout for Spain.
Moody’s said in a statement yesterday it assigned a negative outlook on Spain’s Baa3 sovereign debt as it concluded the review for possible further downgrade of the country’s rating that it had initiated in June.
“The euro continues to be bought,” said Kumiko Gervaise, an analyst at Gaitame.com Research Institute Ltd. in Tokyo. “The news from Moody’s about the Spanish rating is also buoying the euro as it eliminates one of the concerns in Europe.”
Spain will sell bonds due in 2022, 2016 and 2015 tomorrow. The nation’s 10-year yield fell one basis point to 5.81 percent yesterday after an auction of bills beat the maximum target.
The euro may rise to the highest in more than five months against the U.S. dollar, IG Markets Securities Ltd. said, citing trading patterns.
The shared-currency’s upward trend line from the intraday low of $1.2054 on July 25 and Aug. 2 low of $1.2134 gives it “solid” support, said Junichi Ishikawa, a Tokyo-based analyst at IG Markets. Should the euro rise above the Sept. 17 high of $1.3172, it could test $1.32, he said. The level was last reached on May 2. Support refers to a level where orders to buy may be clustered.
The U.S. dollar weakened versus its higher-yielding Australian and New Zealand counterparts before the U.S. Commerce Department releases its report on housing starts today. The data will probably show that new construction rose to a 770,000 annual pace in September from 750,000 in the previous month, according to the median estimate of economists surveyed by Bloomberg News.
Figures from the Federal Reserve yesterday showed industrial production increased 0.4 percent last month, beating the median forecast in a separate Bloomberg poll.
The greenback lost 0.3 percent to $1.0307 per Australian dollar after earlier touching $1.0324, the weakest since Oct. 2. It fell 0.4 percent to 81.75 U.S. cents against New Zealand’s currency.
Source: Bloomberg News