Euro Rally Masking Political Discord as Europe Battles Debt

The euro’s two-month rally against the dollar is running into renewed rifts over Europe’s sovereign debt crisis just as optimism about the U.S. economy increases.

Bolstered by the prospect of higher European Central Bank interest rates as soon as next month, the euro has appreciated almost 9 percent against the dollar from this year’s low. Bets by futures traders on more strength are at levels that indicated reversals in the past. The euro has gained about half as much versus a group of nine developed-nation peers including the pound, franc and Swedish krona, Bloomberg Correlated-Weighted Currency Indexes show.