The euro rose above $1.29 for the first time in four months after Germany’s top constitutional court cleared the way for ratification of Europe’s permanent bailout fund, boosting demand for the shared currency.
The German court imposed “the lightest conditions possible,” said Geoff Kendrick, head of European currency strategy at Nomura International Plc in London. “It removed the possibility of a bad outcome so there’s been a reasonable reaction” in the euro, he said.
The euro appreciated 0.5 percent to $1.2919 at 7.06 a.m. in New York after rising to $1.2937, the strongest since May 11. The common currency gained 0.5 percent to 100.51 yen. It reached 100.65 yen, the highest since July 4. The dollar was little changed at 77.80 yen.
All other countries in the euro area had already ratified the European Stability Mechanism, a 500 billion-euro fund that offers loans to euro-zone members and may buy their bonds to lower borrowing costs.
‘High Probability’
“The review has concluded that the laws that were challenged, with high probability, do not violate the constitution,” chief justice Andreas Vosskuhle told the court in Karlsruhe. “Hence the motions for a temporary injunction were to be rejected.”
The euro has strengthened 3.2 percent in the past month the best performer of the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar dropped 2.4 percent and the yen weakened 1.7 percent.
The Dollar Index (DXY) declined for a second day as U.S. policy makers prepared to start their two-day meeting.
The Fed is likely to announce a third round of bond purchases tomorrow, according to almost two-thirds of economists in a Bloomberg survey, while also extending the duration of its zero-interest-rate policy into 2015.
Two rounds of purchases totaling $2.3 trillion have failed to revive the labor market, which Fed Chairman Ben S. Bernanke said last month is a “grave concern.” That means policy makers will probably announce a new open-ended plan tied to a sustained improvement in the economy rather than specify an amount of purchases and an end-date, according to 32 of the 73 economists in the survey. Twenty-two expect a fixed duration and amount.
Negative Outlook
Moody’s, which placed a negative outlook on the U.S.’s Aaa rating in August 2011, said in a statement yesterday the ranking would probably be cut to Aa1 if no policy is passed to address mounting debt levels.
“The dollar is the least favored currency,” said Stuart Frost, a fund manager at RWC Partners Ltd. in London, which oversees $4 billion. “There will be hints of QE from the Fed. The message will be there is a possibility of QE3 in the future but not at this stage. It will be extremely dovish.”
Frost would consider buying the dollar if it weakens to $1.30 per euro, he said.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against those of six U.S. trading partners, dropped 0.3 percent to 79.601.
Japanese Finance Minister Jun Azumi said moves in the yen yesterday were speculative and the government was ready to act against unacceptable changes in the currency’s value.
The 7 percent gain versus the dollar since mid-March was “clearly speculative, and we won’t accept such moves,” Azumi said in Tokyo. “There is no change to our stance on this.”
Australian Dollar
The Australian dollar rose to a three-week high versus the greenback after Premier Wen Jiabao signaled China has room to add stimulus.
“Be it monetary or fiscal, we still have ample strength,” Wen said at the World Economic Forum in Tianjin yesterday. A fiscal stabilization fund of 100 billion yuan ($15.8 billion) is available for “preemptive” measures, he said. China is Australia’s biggest trading partner.
“China’s slowdown is the biggest downside risk for the Aussie,” said Junichi Ishikawa, an analyst at IG Markets Securities Ltd. in Tokyo. “The currency is likely to be well supported in the long term, however, should we get more stimulus measures from global central banks.”
The Australian currency gained 0.4 percent to $1.0478 after reaching $1.0506, the strongest level since Aug. 23. The so- called Aussie climbed 0.5 percent to 81.53 yen.
The 17-nation euro rose for a second day versus the yen as the Federal Constitutional Court dismissed motions filed by groups seeking to block the fund, while stating a cap of about 190 billion euros ($246 billion) be set on German liabilities. The dollar fell versus 15 of its 16 major peers before the Federal Reserve starts a two-day meeting today amid speculation it will announce a third round of bond purchases to spur growth.
The German court imposed “the lightest conditions possible,” said Geoff Kendrick, head of European currency strategy at Nomura International Plc in London. “It removed the possibility of a bad outcome so there’s been a reasonable reaction” in the euro, he said.
The euro appreciated 0.5 percent to $1.2919 at 7.06 a.m. in New York after rising to $1.2937, the strongest since May 11. The common currency gained 0.5 percent to 100.51 yen. It reached 100.65 yen, the highest since July 4. The dollar was little changed at 77.80 yen.
All other countries in the euro area had already ratified the European Stability Mechanism, a 500 billion-euro fund that offers loans to euro-zone members and may buy their bonds to lower borrowing costs.
‘High Probability’
“The review has concluded that the laws that were challenged, with high probability, do not violate the constitution,” chief justice Andreas Vosskuhle told the court in Karlsruhe. “Hence the motions for a temporary injunction were to be rejected.”
The euro has strengthened 3.2 percent in the past month the best performer of the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar dropped 2.4 percent and the yen weakened 1.7 percent.
The Dollar Index (DXY) declined for a second day as U.S. policy makers prepared to start their two-day meeting.
The Fed is likely to announce a third round of bond purchases tomorrow, according to almost two-thirds of economists in a Bloomberg survey, while also extending the duration of its zero-interest-rate policy into 2015.
Two rounds of purchases totaling $2.3 trillion have failed to revive the labor market, which Fed Chairman Ben S. Bernanke said last month is a “grave concern.” That means policy makers will probably announce a new open-ended plan tied to a sustained improvement in the economy rather than specify an amount of purchases and an end-date, according to 32 of the 73 economists in the survey. Twenty-two expect a fixed duration and amount.
Negative Outlook
Moody’s, which placed a negative outlook on the U.S.’s Aaa rating in August 2011, said in a statement yesterday the ranking would probably be cut to Aa1 if no policy is passed to address mounting debt levels.
“The dollar is the least favored currency,” said Stuart Frost, a fund manager at RWC Partners Ltd. in London, which oversees $4 billion. “There will be hints of QE from the Fed. The message will be there is a possibility of QE3 in the future but not at this stage. It will be extremely dovish.”
Frost would consider buying the dollar if it weakens to $1.30 per euro, he said.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against those of six U.S. trading partners, dropped 0.3 percent to 79.601.
Japanese Finance Minister Jun Azumi said moves in the yen yesterday were speculative and the government was ready to act against unacceptable changes in the currency’s value.
The 7 percent gain versus the dollar since mid-March was “clearly speculative, and we won’t accept such moves,” Azumi said in Tokyo. “There is no change to our stance on this.”
Australian Dollar
The Australian dollar rose to a three-week high versus the greenback after Premier Wen Jiabao signaled China has room to add stimulus.
“Be it monetary or fiscal, we still have ample strength,” Wen said at the World Economic Forum in Tianjin yesterday. A fiscal stabilization fund of 100 billion yuan ($15.8 billion) is available for “preemptive” measures, he said. China is Australia’s biggest trading partner.
“China’s slowdown is the biggest downside risk for the Aussie,” said Junichi Ishikawa, an analyst at IG Markets Securities Ltd. in Tokyo. “The currency is likely to be well supported in the long term, however, should we get more stimulus measures from global central banks.”
The Australian currency gained 0.4 percent to $1.0478 after reaching $1.0506, the strongest level since Aug. 23. The so- called Aussie climbed 0.5 percent to 81.53 yen.
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