Euro Rises Most in a Week on Spain Bailout Speculation

The euro advanced the most in a week versus the dollar after a media report said euro-region policy makers will unveil a financial bailout program for Spain as early as next week.

The shared currency climbed for the first time in four days against the yen after the Financial Times said Spanish and European Union officials were working on plans to trigger European Central Bank bond purchases to boost the Iberian nation’s economy. The Australian dollar led gains among higher- yielding currencies after a Federal Reserve policy maker said the U.S. central bank may hold interest rates close to zero until unemployment falls.

“The euro is up on a report Spain is reaching a compromise on reforms that will make it easier for them to go ahead with a bailout,” said Adam Cole, global head of foreign-exchange strategy at Royal Bank of Canada in London. “Central bank liquidity injections are positive for risk generally, it would also be euro positive.”

The common European currency strengthened 0.4 percent to $1.3020 at 6:28 a.m. New York time, trimming its weekly decline to 0.8 percent. It appreciated 0.3 percent to 101.82 yen. Japan’s currency was little changed at 78.19 per dollar.

The euro will decline to $1.24 by the end of this year, according to the median of 50 bank forecasts in a Bloomberg survey.

Germany’s business climate index stagnated this month, according to the median estimate of 27 economists surveyed by Bloomberg before data is released on Sept. 24. Last month’s reading was the lowest since March 2010.

Industry Drop

A report yesterday showed a composite gauge of services and manufacturing shrank to a three-year low.

The euro has gained 2.2 percent in the past month, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar fell 2.6 percent and the yen weakened 1.1 percent.

The so-called Aussie rose at least 0.2 percent against all but one of its 16 major counterparts after Minneapolis Fed President Narayana Kocherlakota said the central bank should hold rates at around zero until joblessness drops below 5.5 percent. The rate has been above 8 percent since January 2009.

The Australian currency appreciated 0.7 percent to $1.0507, after advancing 0.8 percent, the steepest climb in more than a week. It added 0.7 percent to 82.22 yen.

The pound rose to the highest level in more than a year against the dollar even as Britain reported its biggest August budget deficit on record.

The U.K. currency added 0.4 percent to $1.6276, the strongest level since Aug. 31, 2011. It was little changed at 80 pence per euro.

To contact the reporter on this story: Neal Armstrong in London at narmstrong8@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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