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Euro Rises for Fifth Day as EU Ministers Meet on Debt

Dec. 4 (Bloomberg) -- The euro strengthened for a fifth day versus the dollar on speculation European Union finance ministers meeting in Brussels will make further progress in their efforts to stem the debt crisis.

The 17-nation currency rose to a six-week high against the greenback after the officials confirmed a decision to give Greece until 2016 to meet deficit-reduction targets. The dollar fell for a second day versus the yen as President Barack Obama, in a Bloomberg Television interview, said a Republican offer to resolve the so-called fiscal cliff doesn’t go far enough. The Canadian dollar gained after Bank of Canada Governor Mark Carney kept his bias to raise interest rates.

“The euro is priced for the best outcome in Europe,” Sebastien Galy, a senior foreign-exchange strategist at Societe Generale SA, said in an interview in New York. “There is a thick layer of people waiting to sell. You have to work through a thick layer of orders before you break higher.”

The euro gained 0.3 percent to $1.3094 at 5 p.m. in New York after rising to $1.3108, the highest level since Oct. 18. The shared currency dropped 0.1 percent to 107.24 yen. The dollar fell 0.4 percent to 81.90 yen.

Rand Rally

The rand gained for a second day as data showed South Africa’s current-account deficit widened to the biggest gap since 2008, reducing the central bank’s scope to cut interest rates.

The currency strengthened 0.8 percent to 8.7972 per dollar.

Further gains in the euro may be limited as the 14-day relative strength index versus the dollar rose to 70.2. A reading higher than 70 indicates a currency’s rally may have been too far, too fast and may be due for a correction.

The European Central Bank on Nov. 8 left its benchmark rate at the historic low of 0.75 percent. Policy makers meet Dec. 6 and are forecast to leave the rate unchanged, according to a Bloomberg News survey of 35 economists.

“Inflation is pretty much under control, and I’d have to say that for this reason alone there is rationale to ease official rates,” said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. in New York. “It would not surprise me if the ECB elected to loosen policy with a rate cut this week. The euro continues to shine, although this is unlikely to figure in their decision.”

European Talks

EU finance ministers meeting in the Belgian capital will discuss setting up a common bank supervisor. Greece yesterday offered to spend as much as 10 billion euros to buy back bonds. French Finance Minister Pierre Moscovici said the operation “seems to be happening under satisfactory conditions.”

Spain’s Economy Ministry said yesterday that the nation would receive 37 billion euros next week to recapitalize four of its banks.

Italian 10-year bond yields fell to 4.43 percent, the sixth-straight daily decline and the lowest level since 2010. Spain’s similar-maturity bond yield dropped to 5.3 percent, the third-straight decline.

“There’s a bit more constructiveness out to the euro-zone,” Brian Kim, a currency strategist at Royal Bank of Scotland Group Plc in Stamford, Connecticut, said in a telephone interview. “Currency markets could be subject to more headline trading, at least in this day ahead.”

Dollar Measure

The Dollar Index dropped to a five-week low as deficit-reduction sparring continued.

“We have the potential of getting a deal done,” Obama said at the White House today in his first television interview since winning re-election. “Unfortunately,” he said, House Speaker John Boehner’s proposal “right now is still out of balance.”

Obama spoke the day after Boehner sent a letter to the White House countering the administration’s plan with a proposal that included $2.2 trillion in new revenue and spending cuts without raising rates.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, fell 0.2 percent to 79.675 after sliding to the lowest since Oct. 23.

Canada’s central bank left the benchmark rate on overnight loans between commercial banks at 1 percent, where it’s been for more than two years. Policy makers said a “small degree of slack” in the economy will gradually disappear, bringing inflation to the 2 percent target over the next 12 months. Today’s decision was expected by all 26 economists in a Bloomberg News survey.

The loonie, as the Canadian currency is known for the image of the waterfowl on the C$1 coin, rose 0.2 percent to 99.27 cents per U.S. dollar.

The Swiss franc fell as Credit Suisse Group AG was said to be imposing negative interest rates of up to minus 1 percent on cash balances held by financial institutions.

The franc declined 0.4 percent to 1.2131 per euro after depreciating to the weakest since Sept. 18.

To contact the reporter on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net

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

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