Euro Strengthens on Greece Bailout Optimism; Yen Falls Against Major Peers

The euro strengthened against most of its most-traded counterparts on optimism European leaders will agree to release bailout funds for Greece on Feb. 20.

The yen fell to a six-month low versus the dollar and declined against all its major peers as global equity and commodity markets rallied. The euro pared gains against the dollar as the Greek government drew up legislation that could be used to impose losses on investors who don’t support a debt swap. Norway’s krone rallied even as the central bank said it was monitoring recent gains.

“The euro has a track record of rallying into summits, like we have coming on Monday, only to back pedal when the meetings have missed expectations,” said Joe Manimbo, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co. “Yen weakness has been compounded by the fact that investors are feeling a bit more buoyant about the global economy as well as the situation in Greece.”

The euro rose 0.9 percent to 104.54 yen at 5 p.m. in New York after touching 104.67 yen, the strongest level since Dec. 5. The shared currency gained 0.1 percent to $1.3140 after reaching $1.3198. The dollar rose 0.8 percent to 79.55 yen, and reached 79.62, the strongest since Aug. 4.

The Standard & Poor’s 500 Index rose 0.2 percent, and the MSCI All-Country World Index gained 0.6 percent. The S&P GSCI Index of 24 raw materials advanced 0.3 percent.

‘Agreement on Greece’

Italian Prime Minister Mario Monti, German Chancellor Angela Merkel and Greek Prime Minister Lucas Papademos expressed optimism that an “agreement on Greece” can be reached at a Brussels meeting of euro-area finance ministers on Feb. 20 after a joint conference call today.

Getting investors to agree to a writedown on the debt is a condition for sealing the second Greek bailout as officials seek to cut the nation’s debt load. Euro-area finance ministers have slated the meeting as a make-or-break effort to solve such open questions, Deputy German Finance Minister Steffen Kampeter said in Hamburg last night.

“It’s simply a reversal of an overly pessimistic view on the euro zone from earlier in the week, so there is upside for the euro and there is a recovery in the stability trade,” said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. in New York. “There’s become a clear case of buying the dips in the market’s mentality.”

The New York-based Conference Board’s gauge of the U.S. outlook for the next three to six months increased 0.4 percent in January after a revised 0.5 percent rise the previous month. The cost of living rose 0.2 percent in January after no change the prior month, Labor Department data showed.

Yen Declines

The yen has tumbled 6.6 percent over the past month and the dollar dropped 2.9 percent, the two worst performers among 10 developed-market currencies monitored by Bloomberg Correlation- Weighted Indexes. The euro gained 0.6 percent over the period.

South Korea’s won rose 0.6 percent to 1,125.50 per dollar as foreigners demanded $568.8 million more of the nation’s equities than last week.

Norway’s krone rose 0.3 percent to 5.7135 per dollar and advanced 0.2 percent to 7.5089 versus the euro.

The nation’s central bank is monitoring the krone after its recent gains as policy makers focus on boosting competitiveness in the oil-exporting nation, Governor Oeystein Olsen said. Crude oil futures rose 1.7 percent to $104.04 a barrel in New York.

The pound gained 0.2 percent to $1.5828, extending its weekly advance to 0.5 percent. Sterling rose 1 percent to 125.92, the strongest since Nov. 1.

Sales including fuel climbed 0.9 percent from December, when they rose 0.6 percent, the Office for National Statistics said today, spurring speculation the U.K. economy will avoid a recession.

To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.