Euro Snaps Three-Day Drop Before European Debt Summit; Aussie Dollar Gains

The 17-nation euro yesterday erased losses versus the dollar after the Financial Times reported that Europe may combine temporary and planned permanent rescue facilities to bolster its bailout resources. The European Central Bank is forecast to cut interest rates tomorrow. Australia’s dollar rose against most major counterparts after a report showed faster- than predicted economic growth.

The euro advanced 0.2 percent to 104.33 yen as of 1:30 p.m. The common currency appreciated 0.2 percent to $1.3422. The dollar was unchanged at 77.73 yen. U.S. Treasury Secretary Timothy F. Geithner yesterday backed a German-French push for closer European cooperation, urging policy makers to work with central banks to erect a “stronger firewall” to end the crisis.


Rescue Funds

Operating the European Stability Mechanism in combination with the 440 billion-euro ($590 billion) temporary fund next year would potentially boost Europe’s anti-crisis resources to 940 billion euros. There were negotiations over pairing the two.


The ECB will reduce its benchmark rate to 1 percent from 1.25 percent on Dec. 8, according to the median estimate of 58 economists surveyed by Bloomberg.

ECB Governing Council member Ewald Nowotny said this week that the central bank is observing liquidity shortages in the banking sector and can do more to supply funds.

The euro will rise to $1.37 by September 2012, according to a Bloomberg News survey of analysts. It has fallen 1 percent in the past month, according to Bloomberg Correlation-Weighted Indexes tracking the currencies of 10 developed markets. The yen has advanced 2.4 percent, the best performer, and the dollar has gained 1.9 percent over that period, the data show.

High-Yield Currencies

Jobless claims in the U.S. probably fell to 395,000 last week from 402,000 the prior week, economists in a Bloomberg News survey forecast before the Labor Department tomorrow.

Consumer sentiment will likely pick up this month, according to another Bloomberg survey before the preliminary Thomson Reuters/University of Michigan survey due on Dec. 9. Confidence rose to 65.8 from 64.1 at the end of November, the data is forecast to show. (Bloomberg)