Euro heads for best week since Jan; rally may fade
* Optimism of euro zone debt solution boosts sentiment
* Euro likely peaking as sentiment remains fragile
* U.S. dollar index heads for worst week since May, 2009
(Updates prices, adds quotes, changes byline)
By Wanfeng Zhou
NEW YORK, Oct 14 (Reuters) - The euro headed for its best
week in nine months against the dollar on Friday on optimism
that European leaders would take bold steps to tackle the debt
crisis, but a lack of concrete actions could limit further
gains.
Group of 20 finance ministers and central bank chiefs began
a two-day meeting in Paris on Friday, a day after the euro
zone's 17 member nations completed their approval of the
expansion of the region's bailout fund. See [ID:nL5E7LE00R]
Hopes that officials will agree on the outlines of a plan
in time for a European Union summit on Oct. 23 boosted the
euro. Discussions that China, India and other fast-growing
economies might bolster the capital base of the International
Capital Fund to help rescue Greece further lifted sentiment.
That lifted the common currency to a one-month high just
beneath $1.39. In the near term, analysts said momentum traders
could still push the euro a bit higher, though it remained
fragile and may hit a top ahead of $1.40 in the coming days.
"A lot of this is a short-covering rally," said Mark
McCormick, currency strategist at Brown Brothers Harriman in
New York.
Even though there's positive news from the G20 and optimism
that European policymakers would take bold actions, "there's
still a lot of time in between when these things are announced,
when these things can be enacted, and when they can be put in
place to actually forestall further contagion," he said.
The euro touched a session high of $1.3895 <EUR=EBS> on
trading platform EBS. It was up 3.5 percent on the week, on
pace for its biggest weekly rise since mid-January.
Data from the Commodity Futures Trading Commission showed
Friday that speculators reduced bets against the euro, as they
slightly boosted long positions in the U.S. dollar. [IMM/FX]
Talk that the European Central Bank was buying Italian and
Spanish debt also helped lift the single currency off an
earlier low of $1.3723.
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Euro zone debt crisis graphics http://r.reuters.com/hyb65p
Calculator on banks' needs http://r.reuters.com/jyw62s
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SPAIN DOWNGRADE
Standard & Poor's cut Spain's credit rating, underlining
the challenges facing euro zone officials to contain the debt
crisis. Fitch put a number of European banks on review for
possible downgrades.
Greek Finance Minister Evangelos Venizelos pledged to pass
sweeping austerity measures in parliament next week, declaring
that Greece was in a "fight for our existence."
Inspectors from the European Union, International Monetary
Fund and European Central Bank said they would recommend
releasing an 8 billion euro tranche of aid that Greece needs to
keep paying its bills past mid-November. But they warned that
the country was slipping behind on its targets.
Avery Shenfeld, chief economist at CIBC World Markets, said
for now, hopes that Greece will receive loans and steps to
expand the European Financial Stability Facility (EFSF) have
calmed market jitters.
But he added: "an actual plan will be tougher to deliver,
and the Greek issue will return as that country inevitably
fails to meets its new targets. A default on Greek debt still
leaves risk that investors will refuse to fund Spain or Italy,
countries that the current EFSF isn't large enough to bail
out."
Against the yen, the dollar rose 0.5 percent to 77.22
<JPY=EBS>, after hitting 77.45 on EBS, near a one-month high
set on Wednesday. On the week, the dollar gained 0.6 percent.
An increase in risk appetite hurt the safe-haven dollar,
which slipped 0.5 percent against a basket of currencies
<.DXY>. The dollar index was on track for a weekly loss of 2.6
percent, the biggest since May 2009.
Earnings releases next week from U.S. companies, including
Citigroup <C.N>, Goldman Sachs <GS.N> and Apple <AAPL.O> could
also affect the euro's performance, which has closely tracked
investors' appetite for stocks and other risky assets.
(Additional reporting by Richard Leong; Editing by Kenneth
Barry)
(([email protected]; +1 646 223 6304; Reuters
Messaging: [email protected]))
Keywords: MARKETS FOREX
Currency bid prices at 3:43 p.m. EDT (1943 GMT). All data taken from Reuters
calculated from the levels in the previous New York session.
Last US Close Pct YTD Pct 2010
Oct. 13 Change Change Close
-------------------------------------------------------------
Euro/dlr <EUR=> 1.3876 1.3774 +0.74 +3.73 1.3377
Dlr/yen <JPY=> 77.210 76.840 +0.48 -4.86 81.150
Euro/yen <EURJPY=> 107.16 105.87 +1.22 -1.35 108.63
Dlr/swiss <CHF=> 0.8926 0.8977 -0.57 -4.38 0.9335
Stg/dlr <GBP=> 1.5806 1.5760 +0.29 +1.33 1.5599
Dlr/cad <CAD=> 1.0106 1.0203 -0.95 +1.39 0.9967
Aus/dlr <AUD=> 1.0341 1.0186 +1.52 +1.35 1.0203
Euro/swiss <EURCHF=> 1.2389 1.2365 +0.19 -0.79 1.2488
Euro/stg <EURGBP=> 0.8778 0.8740 +0.43 +2.40 0.8572
Nzd/dlr <NZD=> 0.8049 0.7942 +1.35 +3.31 0.7791
Dlr/Norw <NOK=> 5.5616 5.6190 -1.02 -4.47 5.8218
Euro/Norw <EURNOK=> 7.7210 7.7360 -0.19 -0.88 7.7895
Dlr/Swed <SEK=> 6.5885 6.6447 -0.85 -1.81 6.7098
Euro/Swed <EURSEK=> 9.1473 9.1550 -0.08 +1.85 8.9809
