Euro halts five-day losing run; yen falls sharply

NEW YORK Thu Nov 15, 2012 2:48am IST

The Euro currency sign is seen in front of the European Central Bank (ECB) headquarters in Frankfurt November 6, 2012. REUTERS/Lisi Niesner

The Euro currency sign is seen in front of the European Central Bank (ECB) headquarters in Frankfurt November 6, 2012.

Credit: Reuters/Lisi Niesner

NEW YORK (Reuters) - The euro edged higher against the U.S. dollar on Wednesday, snapping a five-day losing streak, as worries about debt-laden Spain and Greece eased temporarily and after some Federal Reserve officials discussed the need for more bond buying.

The yen fell the most against the dollar and euro in two months after Japanese Prime Minister Yoshihiko Noda said he was ready to dissolve the lower house of parliament this week and hold a snap election next month.

European Union Economic and Monetary Affairs Commissioner Olli Rehn said Spain has taken effective action to address its budget deficits in 2012 and 2013, even though budget steps for 2014 fell short of expectations.

His comments gave a further lift to the euro, which had pared losses on Tuesday after a German government source said Greece may receive aid worth roughly 44 billion euros ($55.93 billion) in a single tranche.

"The better-than-expected news from policymakers in Europe pertaining to Germany's positive disposition to extending Greece additional fiscal flexibility has certainly helped a lot in terms of placating investors' angst," said Ravi Bharadwaj, pricing and market analyst at Western Union Business Solutions in Washington.

The euro rose 0.3 percent to $1.2734, on track for its best day in two weeks. But sentiment on the currency was fragile, analysts said, as the International Monetary Fund and the euro zone remain at loggerheads over how Athens should bring its debt down to a sustainable level.

The euro zone common currency briefly jumped to a session peak of $1.2777 after the minutes of the Federal Reserve's October meeting showed a number of Fed officials thought the U.S. central bank would need to step up asset purchases next year when the Fed's Operation Twist program expires.

On Tuesday, the Fed's influential vice chair, Janet Yellen, said U.S. interest rates may need to stay near zero until early 2016 to boost employment forcefully.

Against the yen, the euro rallied 1.3 percent to 102.14 yen. The dollar gained 1.1 percent to 80.30 yen.

Japan's main opposition Liberal Democratic Party, which favors further monetary policy easing by the central bank, leads in opinion polls and the prospect of an early election is regarded as negative for the yen.

LDP leader Shinzo Abe called on the central bank on Wednesday to print "unlimited yen" to achieve a new inflation target.

Japanese Prime Minister Noda told parliament he would be willing to dissolve the lower house on November 16 and hold elections in December if the opposition agreed to pass reforms to the electoral system.

The prospect of further Fed easing could limit the dollar's gains. Earlier, data showed U.S. retail sales fell in October, while producer prices unexpectedly weakened last month.

"This morning's economic reports paint a picture of a slow and struggling U.S. recovery that will require continued stimulus from the Federal Reserve," said Kathy Lien, managing director of FX strategy at BK Asset Management in New York.

Sterling hit a more than two-month low against the dollar at $1.5839 after the Bank of England's inflation report painted a gloomy outlook for the UK economy and governor Mervyn King said quantitative easing could still be restarted.

The pound was last down 0.2 percent at $1.5841.

(Additional reporting by Gertrude Chavez-Dreyfuss)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Markets

REUTERS SHOWCASE

Segway in India

Segway in India

Segway’s India business pegs hope on tech-savvy Modi  Full Article 

Power Outage

Power Outage

Mumbai hit by power cuts  Full Article 

Commodities

Commodities

Gold imports, premiums to jump on festive demand - top refiner  Full Article 

Economic Worries

Economic Worries

Pakistan's promises to IMF in doubt as protests sap economy   Full Article 

Islamic Finance

Islamic Finance

Basel III deposit challenge looms over Islamic banks   Full Article 

Antitrust Probes

Antitrust Probes

U.S. business lobby says concerned China antitrust probes unfair.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage