The euro rallied the most in almost two years versus the US dollar after auctions of Portuguese, Spanish and Italian debt garnered more demand and German Chancellor Angela Merkel pledged to do whatever’s necessary to ease the sovereign-debt crisis.
The 17-nation currency rose this week against all of its major counterparts except the Swedish krona and Danish krone on speculation finance ministers may reinforce measures at a meeting next week to help indebted nations. The Australian dollar fell for a second week versus the greenback as deadly floods threatened to slow economic growth.
“The bond auctions in the periphery zone, that’s what the driver has been,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. “There’s a bit of speculation as to what’s going to be discussed and how far it’ll go in terms of the stability fund. Some of the short covering in the euro was on the back of that.”
A short is a bet an asset may decline in value.
The euro advanced 3.7 percent this week to US$1.3388, from US$1.2907 on Jan. 7, after touching US$1.3457 on Friday, the highest level since Dec. 14. Its biggest weekly gain since the five days ended May 22, 2009, erased last week’s drop.
The euro appreciated 3.4 percent to ¥110.94, from ¥107.32. The US dollar decreased 0.3 percent to ¥82.87, from ¥83.15.
The Swedish krona was the best performer against the US dollar this week among the greenback’s most-traded counterparts, appreciating 4.2 percent to 6.6587.
The euro advanced from a four-month low of US$1.2867 reached on Monday, rising as Merkel expressed this week her willingness to do what’s needed to stem the debt crisis.
South Africa’s rand was the worst performer against the dollar among the most-traded currencies. It dropped 1.9 percent to 6.9351 rand per US dollar after China raised reserve requirements for lenders by a half-percentage point in an effort to stem inflation, dimming the prospects of commodity exporters.
Asian currencies gained this week as easing concern about Europe’s debt crisis and the prospect of more interest-rate increases boosted investor appetite for emerging-market assets.
South Korea’s won had its fourth weekly advance and China’s yuan appreciated ahead of President Hu Jintao’s (胡錦濤) visit to Washington. German Finance Minister Wolfgang Schaeuble said on Thursday that EU member states would assemble a “comprehensive package” by March to tackle the sovereign debt crisis.
“We have seen interest-rate hikes by Korea and Thailand and we may see rate moves by most Asian countries,” said Thio Chin Loo, a senior currency analyst at BNP Paribas SA in Singapore. “The key driver for the Asian currencies has also been the dollar’s volatility against the major currencies in view of what’s happening in Europe.”
The won rose 0.7 percent for the week to 1,114.30 per US dollar as of the 3pm close in Seoul, according to data compiled by Bloomberg.
The yuan strengthened 0.53 percent to 6.5931 and Malaysia’s ringgit gained 0.4 percent to 3.0573, touching a 13-year high of 3.0475.
India’s rupee was little changed this week at 45.36 and fell 0.3 percent on Friday after China told banks to set aside more deposits as reserves for the fourth time in two months.
The New Taiwan dollar rose for a seventh week, the longest winning streak since October, on speculation overseas investors will increase holdings of Taiwanese assets as economic growth accelerates.
Minister of Economic Affairs Shih Yen-shiang (施顏祥) said last month that GDP probably increased more than 10 percent last year.
The economy contracted in 2009 for the first time since 2001. The currency reached a 13-year high on Thursday and was 2 percent stronger a minute before the close on Friday before ending little changed on suspected central bank intervention.
Elsewhere, Singapore’s dollar rose 0.7 percent to S$1.2894 for the week against its US counterpart, according to data compiled by Bloomberg. Indonesia’s rupiah fell 0.4 percent to 9,068 and the Philippine peso declined 0.1 percent to 44.21.
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