By TraderVox.com
Tradervox (Dublin) – The euro advanced against most major peers after governments in the region agreed to offer bailout loan to Spain. Spain is the third largest economy in the region and it has encountered its greatest debt crisis since the monetary union was established. It 10-year bond yield has been high touching 6.5 percent in April only 0.5 percent less than the 7 percent reached by Greece, Ireland, and Portugal before they requested for bailout. Spain has been looking for support in recapitalizing some of its banks that have experienced debt crisis.
After European governments agreed to support Spain, the euro rose to two-weeks high against the dollar, decreasing the demand for safe haven currencies leading to dollar and yen weakening. Spain requested for $126 billion in aid to help its banking system making it the fourth country in the euro area to ask for such international bailout. According to Imre Speizer, investors have been wondering what will happen to Spain looking for any sign on how long it will drag; however, the decision by EU governments is an indication that they are committed to solving problems in the region which is encouraging for the euro. Speizer, who is a Currency Strategist in Auckland, added that Spanish bailout is bullish for the euro since it shows lawmakers’ willingness to act.
The 17-nation bloc currency increased by most in two weeks reaching $1.2671, the highest since May 23 before retreating 0.9 percent to $1.2631. It climbed 1.1 percent against the yen to trade at 100.59. The US dollar had added 0.2 percent against the yen to exchange at 79.64 yen. With these positive reports from euro area, analysts are saying that the euro might climb to $1.2786 as Spain concerns ease. This will boost risk appetite in the market hence we are bound to see some movement in commodity related currencies.
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