Euro posts largest gain in six months on Fed hopes


Sun, Aug 26, 2012 - Page 15

The euro had its largest weekly advance against the greenback in six months as the US Federal Reserve signaled it was increasing likely to try to stimulate economic growth and amid growing optimism Europe’s leaders would contain the debt crisis.

The 17-nation shared currency gained for a second week as German Chancellor Angela Merkel said she wanted Greece to stay in the monetary union and that her nation was ready to help the Greek government take the needed steps to resolve its economic woes.

The euro on Friday snapped four days of gains after European Central Bank President Mario Draghi’s plan to buy government bonds was said to be held up pending a German court ruling. US Fed Chairman Ben Bernanke is to speak on Friday in Jackson Hole, Wyoming, where he may clarify his thinking on the need for stimulus.

“The Fed’s dovish tone definitely put people on watch,” Brian Kim, a currency strategist at Royal Bank of Scotland Group PLC in Stamford Connecticut, said in a telephone interview on Friday. “That meeting took place before the latest payroll data, before the latest consumer spending data. People said, well, we have to take that into consideration. It definitely puts more onus on the Jackson Hole speech.”

The euro rose 1.4 percent this week to US$1.2512, its largest weekly gain since the five days ended Feb. 24. The shared currency climbed to US$1.2590 on Thursday, the strongest since July 4. The euro gained 0.3 percent to ¥98.44, the second weekly advance. The dollar weakened 1.1 percent to ¥78.67.

Meanwhile, Australia’s dollar fell against 12 of its 16 major peers for the week as a report showed China’s manufacturing may contract at a faster pace.

“Australia’s dollar has really been underperforming today after weak Chinese data,” Eric Viloria, senior currency strategist at Gain Capital Group LLC in New York, said in a telephone interview on Thursday. “It’s looking a bit heavy here.”

The pound strengthened 0.8 percent this week to US$1.5820 and declined 0.8 percent to £0.7924 per euro.