By TraderVox.com
Tradervox.com (Dublin) – The 17-nation currency has strengthened against the dollar to one-month high as speculation Spain will request for bailout mounted. The region’s currency rose versus most major peers as Moody’s Investors Service held Spain’s credit rating at a record low of baa3. The increased optimism in the market came as the European Union leaders prepare to meet in a summit later this week. The US dollar weakened against major peers as risk appetite increased in the market. The decline came prior to a report from the US expected to show that housing starts in the US rose last month.
Talking about the euro strength, Masato Yanagiya, noted that the euro is raising as a result of speculation that Spain will request precautionary credit line to activate ECB bond-buying program. Yanagiya, who is the head of currency and money trading at Sumitomo Mitsui Banking Corp, added that the expectations are rising as we head closer to the EU Summit. The risk appetite has pushed stocks higher, with MSCI Asia Pacific Index rising by 1.1 percent. The Standard & Poor’s advanced by one percent yesterday while the Stoxx Europe 600 Index rose by 1.3 percent.
Risk appetite increased in the market after Germany indicated that it was open to Spain seeking precautionary credit line from the European Stability Mechanism. The comments by two coalition lawmakers in Germany indicates a change of position from the full bailout request Germany had placed for Spanish bonds to be bought by ECB. According to Kumiko Gervaise, who is an analyst in Tokyo at Gaitame.com Research Institute Ltd, the euro has continued to gain demand and the Moody’s rating has helped to push it higher as it put more pressure on Spain to request bailout.
The 17-nation currency gained 0.3 percent to $1.091 during midday trading in Tokyo after touching its highest since September 17 of $1.3124.
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