Jun 8, 2010 Posted by brindils on Jun 8, 2010 in Business | 0 comments

The euro rose for the very first time in four days

The euro rose for the very first time in four days versus the greenback as stocks and commodities advanced, damping demand for haven currencies.

The Australian and Canadian dollars rose against most of their key counterparts. The pound fell versus most of its significant peers after Fitch Ratings said the U.K.’s fiscal challenge is “formidable.” The Standard & Poor’s 500 Index ended the day up 1.1 percent after it swung between gains and losses at least 13 times.

“Any time you see a positive close on Wall Street, that tends to help whet investors’ appetite for riskier assets,” said Joe Manimbo, a market analyst in Washington at Travelex Global Business Payments, a currency-exchange network.

The euro rose 0.4 percent to $1.1973 at 5 p.m. in New York, from $1.1923 yesterday. It gained as much as 0.7 percent to $1.2009. The yen fell 0.1 percent to 91.46 per dollar, following gaining as much as 0.6 percent and losing as much as 0.6 percent, from 91.37 yesterday. It fell 0.5 percent to 109.49 per euro, following gaining as much as 0.6 percent.

The euro also gained on speculation the Swiss National Bank intervened in the market to weaken the franc following it touched a record high versus Europe’s shared currency. The franc briefly dropped to 1.3910 per euro following gaining 0.9 percent to 1.3746, a record. It later traded at 1.3796.

‘Pushing Back’

“The euro’s abrupt rebound against the Swiss franc, coming around the end of the European trading session, suggests that Swiss officials might be pushing back by intervening to slow their currency’s rise,” said Joe Manimbo, a market analyst in Washington at Travelex Global Business Payments, a currency- exchange network.

A spokesman for the SNB, Werner Abegg, declined to comment. Central banks intervene by buying or selling currencies to influence exchange rates.

The euro-region’s debt crisis may prompt the European Central Bank to buy bonds as part of a so-called quantitative- easing program to spur the economy, HSBC Holdings Plc said.

“The ECB has been running ultra-loose policy now for more than one year, and I can only imagine we will take further steps toward increased government purchases,” Steven Significant, London- based global head of fixed-income research at HSBC, said today in a presentation in London. “The problem for the euro zone is that we just have too much debt.”

European finance ministers put the finishing touches yesterday to the European Financial Stability Facility, a fund backed by 440 billion Euros ($525 billion) in national guarantees designed to halt the spread of the debt crisis that began in Greece.

Canada, Australia

Canada’s dollar appreciated for a second day and Australia’s rose for the initial time in three days.

“Because sovereign risk is the issue, the picking starts to be about sovereign names as well,” said Camilla Sutton, a Bank of Nova Scotia currency strategist in Toronto. “Australia and Canada have very strong fundamentals.”

The Canadian dollar gained 1.4 percent to C$1.0472 per U.S. dollar in Toronto, from C$1.0617 yesterday. The Aussie climbed 2.2 percent to 82.82 U.S. cents, from 81.04 cents.

The dollar fell for the 1st time in four days against its developed-world counterparts, Bloomberg Correlation-Weighted Indexes showed, after Federal Reserve Chairman Ben S. Bernanke said the U.S. economic recovery is “moderate paced,” boosting demand for riskier assets.

The Fed will lift its benchmark interest rate from a record low before the economy returns to full employment or inflation surges, Bernanke said yesterday in Washington. Officials don’t know when the process will start, he said. The rate has been a range of zero to 0.25 percent since December 2008.

Rate Bets

Futures trading on the CME Group exchange showed a 33 percent chance the Fed will raise its target rate for overnight bank lending by at least a quarter-percentage point by its December meeting, down from 50 percent a month ago.

Japan’s currency weakened amid speculation a new cabinet may favor a weak-yen policy. Yoshihiko Noda was named Japanese finance minister, bringing support for spending cuts as new Prime Minister Naoto Kan compiles a plan to rein in the world’s biggest public debt.

Fitch suggested British Prime Minister David Cameron will need to speed up budget-deficit cuts to protect the U.K.’s top credit rating. Treasury estimates show government debt-interest costs reaching 70 billion pounds ($101 billion) in five years, up from 31 billion pounds in the last fiscal year.

“The scale of the United Kingdom’s fiscal challenge is formidable,” Fitch said in the very first statement by a credit- rating firm on the U.K. since Cameron took office May 11.

The government will unveil an emergency budget June 22, outlining cuts to tackle a deficit that reached 11.1 percent of gross domestic product in the fiscal year through March.

Crude oil for July delivery rose 1.5 percent to $72.53 a barrel in New York.

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