The euro rose against the dollar and yen after government leaders holding all-night talks in Brussels added 200 billion euros ($267 billion) to their crisis-fighting capacity and toughened anti-deficit rules.
The Dollar Index fell and higher-yielding currencies gained after U.S. consumer confidence rose to a six-month high. The 17-nation currency fell earlier as U.K. Prime Minister David Cameron said there was “fundamental disagreement” in European Union talks in Brussels and as Finland threatened to withdraw from the permanent bailout fund if changes to decision making are introduced.
“Stricter budget rules are probably the most significant development during this whole crisis,” said Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York. “There has been more positive than negative developments. We managed to get 17 euro zone leaders and some other European leaders agree to a fairly fundamental change in the way fiscal policy operates.”
The euro rose 0.3 percent to $1.3386 at 5 p.m. New York time, after gaining as much as 0.7 percent. The shared currency added 0.3 percent to 103.89 yen and the Japanese currency was little changed at 77.65 per dollar.
Bennenbroek said he expects the euro to end the year at $1.30.
Futures traders decreased their bets that the euro will decline against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission show.
The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- so-called net shorts -- was 95,814 on Dec. 6, compared with net shorts of 104,302 a week earlier.
South Africa’s rand was the best performer against the dollar, strengthening 2.1 percent to 8.0959 per dollar as stocks and commodities rose. The Standard & Poor’s 500 Index advanced 1.7 percent and the S&P GSCI Index of 24 raw materials climbed 0.2 percent.
The European Central Bank was said to buy Spanish and Portuguese government bonds, with two people saying they saw the trades for each nation. The sources declined to be identified, because the trades are private. An official at the ECB declined to comment.
Spanish and Italian 10-year bonds erased declines. The yield on Spain’s 10-year securities fell seven basis points, or 0.07 percentage point, to 5.75 percent. It earlier rose 17 basis points. Italian 10-year yields fell 10 basis points to 6.36 percent, after rising 23 basis points to 6.68 percent.
Norway’s krone rose 0.7 percent to 5.7461 against the dollar and crude oil futures added 1.8 percent to $99.77 a barrel in New York.
The Dollar Index dropped for the fourth time in five days as signs the world’s biggest economy will avoid a recession reduced investor appetite for safer investments. The gauge, which IntercontinentalExchange Inc. uses to track the greenback against six major trading partners, fell 0.3 percent to 78.593.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 67.7 this month from 64.1 at the end of last month.
South Korea’s won fell against all its major counterparts after the central bank said the economy is likely to grow 3.7 percent next year, slowing from a 3.8 percent gain this year. Inflation is forecast at 3.3 percent, compared with 4 percent in 2011, the central bank said.
The won fell 1.4 percent to 1,146.83 per dollar, its worst daily loss in four weeks.
The euro pared a weekly loss to little changed against the dollar and a 0.5 percent decline versus the yen.
Finland is ready to withdraw its support from Europe’s permanent rescue mechanism if the Nordic country’s condition of unanimous decision making is ignored, Finance Minister Jutta Urpilainen said. Europe’s leaders last night agreed on the need for a “qualified majority” to speed up decision-making and prevent individual countries from blocking bailouts.
“The issue that we have is that every single country in the euro zone has to approve the rules and you’re already starting to hear countries not keen to lose sovereignty like that,” said Charles St-Arnaud, a foreign-exchange strategist at Nomura Holdings Inc. in New York.
The euro has gained 1 percent in a past three months against nine developed-nation counterparts tracked by the Bloomberg Correlation-Weighted Currency Indexes. The dollar increased 2.9 percent and the Japanese currency was 1.1 percent stronger.