Barefoot Investor: Euro Rises on Speculation Greek Default May Contain Sovereign-Debt Crisis

The euro advanced against the dollar, erasing its drop, on speculation the European Financial Stability Facility may guarantee Greek bonds to make it easier for the European Central Bank to accept a default on the debt.
The Swiss franc fell against all of its major counterparts as the prospects for an agreement at today’s summit in Brussels reduced demand for a refuge.

“The two things everybody’s looking for is either an expansion of the size of the EFSF or some clear statement about the EFSF being allowed to buy bonds in the secondary market,” said Jens Nordvig, a managing director of currency research in New York at Nomura Holdings Inc. “That will be the decisive measure that could be used to Spain and Italy.”

The euro gained 0.3 percent to $1.4257 at 8:29 a.m. in New York, from $1.4215 yesterday, after earlier dropping 0.5 percent. The shared currency advanced 0.3 percent to 112.32 yen, from 111.99. The dollar was little changed at 78.79 yen.

Policy makers would aim to keep any period of Greek default as short as possible, said a European Union government official, who spoke on condition of anonymity because deliberations before today’s Brussels summit were confidential.

The bonds could be backed up by top-rated securities sold by the European Financial Stability Facility, a national central bank official said. No decisions have been taken, and an ECB spokesman declined to comment.(Bloomberg)


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