By TraderVox.com
Tradervox.com (Dublin) – The euro gained on Tuesday against the yen as speculation that European Central Bank plan of bond purchases will help solve the debt crisis in the region. Confidence in the euro improved as European Union President Herman Van Rompuy met with German Chancellor Angela Merkel in Berlin as they discussed the debt crisis. World leaders are urging Germany to accept the bond buying program as it might be the only way out of the crisis according to Mario Draghi, the ECB President. The Italian Minister Mario Monti and the French President Francoise Hollande also met in Rome for discussions. Italy and Spain have refrained from asking for aid from ECB, which might lead to a delay in rolling out of the bond buying program.
According to Daisuke Karakama, a Market Economist at Mizuho Corporate Bank Ltd in Tokyo, it would be a good boost for the euro if the European Central Bank were to buy three-year maturity bonds for countries such as Spain and Italy. According to Jean-Paul Gauzes who is a member of European Parliament, Draghi indicated to the parliament that he would be comfortable buying bonds of up to three-year maturity as this does not constitute state financing when he a addressed a closed door session in Brussels on Monday.
As the ECB prepares to hold its policy meeting tomorrow Sept 6, Akira Moroga, a Manger at Aozora Bank Ltd, the euro might experience some short-covering as speculation of bond buying program rises. Economists have indicated that September will be a pivotal month for the euro as it might be the month when the 17-nation currency tumbles or regains market confidence. Further, if Draghi goes ahead with his plan to buy bond from sovereign governments, the euro will be debased and it is likely to fall against major currencies.
The 17-nation currency increased against the yen by 0.4 percent on Tuesday to trade at 98.89 yen during the Tokyo trading session. The shared currency also advanced against the dollar by 0.2 percent to trade at $1.2619.
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