Euro Rises for Third Day on German-French Agreement on Greece

Euro Rises to Week High on German-French Agreement on Greece
French president Nicolas Sarkozy and German chancellor Angela Merkel. Photographer: Jock Fistick/Bloomberg

The euro rose for a third day against the dollar after Germany and France reached an agreement on addressing Greece’s debt crisis before a summit aimed at stopping contagion in Europe’s bond markets.

The 17-nation currency touched the highest level in a week versus the yen before paring its advance as a report showed European services and manufacturing growth slowed more than economists forecast in July. The Swiss franc weakened after Blick, a Zurich-based newspaper, cited Economy Minister Johann Schneider-Ammann as saying the currency’s strength against the euro is “alarming.” Australia’s dollar weakened after data showed Chinese manufacturing slowed.

“The market is buoyant on reports France and Germany have reached an agreement on new aid for Greece,” said Roberto Mialich, a senior currency strategist at UniCredit SpA in Milan. “The euro should remain relatively supported,” though “there are still some potential sources of uncertainty that might prevent a rally against the safe-haven currencies,” he said.

The euro advanced as much as 0.6 percent to $1.4295, the highest level since July 11, before trading at $1.4242 as of 9:49 a.m. in London. The common currency climbed 0.2 percent to 112.23 yen, after reaching 112.69 yen, the strongest since July 14. The dollar was little changed at 78.78 yen. The dollar was little changed at 78.85 yen.

Euro-area leaders and officials will convene today for the second time in a month as they aim to break a deadlock over a new Greek rescue. While German Chancellor Angela Merkel said this week the crisis can’t be resolved in “one spectacular step,” Greek Prime Minister George Papandreou said in an interview that the summit could be a “make-or-break moment” for the euro region.

Accord Details

Merkel and French President Nicolas Sarkozy reached an agreement on Greece after seven hours of talks at the Chancellery in Berlin and details will be released at today’s summit, the governments said in a statement. The discussions also included European Central Bank President Jean-Claude Trichet and European Union President Herman van Rompuy, who participated by telephone.

A composite index based on a survey of euro-area purchasing managers in services and manufacturing industries fell to 50.8 from 53.3 in June, London-based Markit Economics said today. Economists forecast a drop to 52.6, a Bloomberg News survey showed. A reading above 50 indicates growth.

Dollar Index

The franc slid 0.4 percent to 1.1697 per euro, and touched 1.1750, the weakest since July 12. It depreciated 0.1 percent to 82.07 centimes per dollar.

“We are prepared” for any measures to be taken, the economy minister was quoted as saying in the Blick report, adding that any short-term action would have to be taken by the Swiss National Bank.

The Dollar Index touched its lowest level since July 6 as President Barack Obama’s administration signaled it may accept a short-term increase in the U.S. debt limit only if it’s combined with a major agreement to cut the deficit.

Obama “must have a firm commitment to something big,” White House spokesman Jay Carney told reporters yesterday. Obama met with top congressional Democrats as the Aug. 2 deadline for raising the $14.3 trillion debt limit nears. The president this week endorsed a plan from the Gang of Six, a bipartisan group of U.S. senators, that may help speed up negotiations.

IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, including the euro, the yen and the pound, fell as much as 0.4 percent to 74.532 before recovering to 74.698.

Bipartisan Plan

“In terms of the debt ceiling issue, the market focus is shifting to how policy makers will hammer out details on a bipartisan plan to cut deficits,” said Junichi Ishikawa, a Tokyo-based market analyst at IG Markets Securities Ltd. “The market wants to see how the situation will develop, and so people can’t buy the dollar.”

The so-called Aussie dollar snapped a two-day advance as China’s preliminary purchasing managers’ index, compiled by HSBC Holdings Plc and Markit Economics, dropped to 48.9 in July from a final reading of 50.1 in June. A number above 50 indicates expansion. China is Australia’s largest trading partner and New Zealand’s second-largest export destination.

“I’ll be bearish both on the Aussie and kiwi, especially the Aussie,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. There are “concerns that a slowing China may not have so much demand for resources and minerals from Australia.”

Australia’s currency declined 0.3 percent to $1.0720. New Zealand’s dollar, the so-called kiwi, was little changed at 85.60 U.S. cents after earlier touching a record 85.90 cents.


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