Euro Rises Against Dollar On Spain Reports
The euro climbed against the U.S. dollar and other major currencies on Tuesday in the wake of reports that Spain was considering requesting a line of credit from Europe’s bailout fund.
The common currency EURUSD +0.42% climbed to $1.2973 by mid-afternoon in Tokyo, up from $1.2953 in North America on Monday.
The gains came after the Financial Times reported that the country was ready to make a formal request, but was delaying an announcement due to concern over the effect on other euro-zone members such as Italy.
“If this story has legs — and the timing fits, given [the European Union summit meeting on Thursday and Friday] — the euro may find further support,” said Michael Turner, a fixed income and currency strategist at RBC Capital Markets.
Stan Shamu, a market strategist at IG Markets, said the euro rallied close to the $1.30 mark and stayed near that psychologically-important level after the report, noting that fears that Spain may request a bailout have so far kept the currency from falling sharply by keeping “euro sellers at bay.”
Several analysts have said that a formal request for a financial bailout from Madrid would only serve to boost the euro, as it would contain the euro-area’s debt crisis and prevent a worse outcome.
A separate report in The Wall Street Journal, which cited a senior Spanish Ministry official, said Madrid was uncertain of a unanimous backing for its request.
The official reportedly said Spain would prefer a bailout arrangement in the form of a credit line that would make money available to the nation from the European Stability Mechanism only if needed. Under such an option, the ESM wouldn’t need to become the government’s sole lender, buying up all debt issued by Madrid.
The ICE dollar index DXY -0.29% , which measures the greenback against a basket of six major global currencies, dropped to 79.669 from 79.711.
The WSJ Dollar index XX:BUXX -0.20% , a gauge of the U.S. unit’s moves against a slightly wider currency basket, was little changed at 69.77.
Among other major currency pairs, the British pound GBPUSD +0.20% climbed to $1.6077 from $1.6071, while the Australian dollar AUDUSD +0.25% inched up to $1.0267 from $1.0258.
Against the Japanese currency, however, the dollar USDJPY +0.26% rose to 78.84 yen, from ¥78.71 in U.S. trading late on Monday.
Marketwatch
