Euro Gains Amid Greek-Aid Report; Aussie Climbs on IMF

The euro strengthened against the dollar amid speculation Greece will receive its next aid payment as European finance officials met in Paris to forge a common position on the bailout.

The euro pared gains after Moody’s Investors Service cut France’s bond rating to Aa1 from Aaa, with its outlook remaining negative. The dollar fell against all of its 16 most-traded counterparts except the yen on speculation U.S lawmakers will reach agreement on the nation’s budget and avert the so-called fiscal cliff, damping demand for safety. The Canadian and Australian dollars extended gains against the greenback as the International Monetary Fund said it’s considering classifying them as reserve currencies.

“The market was still nervous ahead of the euro-group summit,” Mike Moran, a senior currency strategist at Standard Chartered Plc in New York, said in a telephone interview. “It was particularly fearful that we weren’t going to get any firm resolutions around when Greece would get its next tranche. Any news suggesting that Greece will get its next payment represents good news.”

The euro gained 0.6 percent to $1.2814 as of 5 p.m. New York time, after slipping 0.2 percent last week. The yen weakened 0.1 percent to 81.41 versus the U.S. currency after falling as much as 0.3 percent to 81.59, the weakest level since April 25. The Japanese currency fell 0.7 percent to 104.32 per euro after earlier depreciating to 104.33, the lowest since Oct. 25.

‘Market Optimism’

European finance ministers move to Brussels tomorrow where they will give a tentative go-ahead for the disbursement of 44 billion euros ($56 billion) on Dec. 5, reported Reuters, citing officials familiar with the meeting.

In Athens, the leaders of two parties backing the coalition government of Prime Minister Antonis Samaras called for release of the next payment.

Greece “can’t be in the middle of a tug-of-war between the European Union and the International Monetary Fund,” Democratic Left leader Fotis Kouvelis said, according to statements televised live on state-run NET TV. Pasok leader Evangelos Venizelos told reporters Greece can bear no further delays.

The Canadian and Australian dollars “are to be considered for inclusion” separately in the IMF’s “Currency Composition of Official Foreign-Exchange Reserves” data, the Washington-based lender said in a report published on Nov. 14. They’ve previously been included in an “other currencies” category in the COFER reports.

Canada’s dollar climbed 0.5 percent to 99.63 cents per U.S. dollar. The Aussie added 0.7 percent to $1.0412.

Fiscal Cliff

Brazil’s real gained after analysts lowered their forecasts for 2013 economic growth, bolstering bets that the country’s central bank will keep borrowing costs low.

The currency appreciated 0.1 percent to 2.0823 per dollar after closing at a five-month low Nov. 16. The real rose as much as 0.8 percent, its biggest increase since Aug. 31.

The dollar declined as lawmakers expressed optimism on the fiscal cliff, the $607 billion in automatic tax increases and spending cuts scheduled to take effect at the beginning of 2013 unless Congress acts.

“I am confident we can get our fiscal situation dealt with,” Obama said at a news conference in Bangkok, where he began a three-nation trip. House Speaker John Boehner, who called Nov. 16 discussions with Obama “constructive,” said Republicans are willing to put revenue on the table in exchange for spending cuts.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, dropped 0.3 percent to 80.981 after reaching 81.455 on Nov. 16, the highest since Sept. 5.

Funding Currency

“The U.S. dollar is still the main funding currency of the world,” Hans Redeker, head of foreign-exchange strategy at Morgan Stanley in London, told Maryam Nemazee on Bloomberg Television’s “The Pulse” today. “When you have more information that we can deal with the fiscal cliff, then it is going to work initially against the dollar, especially versus higher-yielding currencies.”

The dollar fell as sales of previously owned U.S. homes climbed in October, indicating gains in the real-estate market are being sustained by cheap borrowing costs.

Japan’s currency dropped against all of its major peers after Kyodo News reported Liberal Democratic Party leader Shinzo Abe will choose someone who favors inflation targets as the next Bank of Japan governor. The BOJ will end a two-day policy meeting tomorrow.

Yen Declines

The yen has fallen 7.4 percent this year, the most among the 10 developed currencies measured by Bloomberg Correlation-Weighted Indexes. The euro is the second-worst performer, losing 2.8 percent, while the dollar has declined 1.4 percent.

The dollar may rise to a 30-week high versus the yen after bouncing off a key support level, according to Credit Suisse Group AG, citing trading patterns.

The market is due to correct lower back toward the area from 80.56 to 80.68, after which it may appreciate to 82.68, its highest level since April 4, according to Cilline Bain, a technical strategist at Credit Suisse.

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