By TraderVox.com
Tradervox.com (Dublin) – The 17-nation currency rose to a two-month high versus the greenback as speculation about the European Central Bank plan to announce an unlimited bond buying program today rose. The so called sterilized bond buying program will involve getting funds from other ECB financial systems to be used in bond purchasing. The euro remained high against the yen as two ECB officials indicated that Mario Draghi, the ECB President, is in favor of such a plan to stem the region’s debt crisis. Draghi had told lawmakers in a closed door session that the European Central Bank’s central mandate compels it to intervene in the bond market to ensure that the euro survives. The euro had dropped on Monday as speculation rose on the decision to be taken by the ECB prior to a court decision over the legality of the ECB’s European Stability Mechanism.
According to Emma Lawson, a Currency Strategist in Sydney at National Australia Bank Ltd, the market looks pleased by the details at hand prior to ECB decision. She also added that the increased optimism is due to the fact that ECB looks set to following through its earlier pledge to do everything within its power to salvage the euro. She predicted that the euro will remain at the current levels, which might extend into the ECB meeting. Under the Monetary Outright Transactions, the ECB blueprint, the central bank is supposed to refrain from making any public cap on yields; as such, the bond-purchases program will only aim at government bonds with maturities of up to three years.
The plan seems to be gaining popularity albeit Germany’s concerns. The German Chancellor Angela Merkel said yesterday that she is willing to accept temporary bond buying plan from the ECB. These sentiments have strengthened the euro which rose by 0.3 percent against the dollar to trade at $1.2606 at mid day trading in Tokyo. The 17-nation currency increased by 0.1 percent against the yen to exchange at 98.83 per euro.
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