The FINANCIAL — The euro advanced for the first time in five weeks against the dollar as six central banks including the Federal Reserve acted to make more funds available to lenders to keep Europe's debt crisis from deepening, according to gulfnews.
Gains in the shared currency were tempered by concern that a summit of European leaders this week won't be able to stem the two-year-old crisis that began in Greece. South Africa's rand was the best performer among the dollar's 16 most-traded peers as stocks and commodities rebounded from two weeks of losses. The greenback and the yen were the biggest losers as demand for safety faded.
The euro rose 1.2 per cent to $1.3391 on Friday, its first weekly gain since the five days ended October 28. It advanced from a seven-week low of $1.3212 that was reached November 25 as investors avoided risk. The 17-nation currency was strengthened 1.5 per cent versus the yen to 104.43 in its first weekly advance since November 4. The dollar gained for a second week against the yen, rising 0.3 per cent to 77.90 yen.
South Africa's rand appreciated 6.2 per cent to 8.0437 in its biggest weekly gain since February 2009.
The Swiss franc declined versus the euro, as Switzerland said it may consider additional steps to support the central bank in its fight to curb the currency's gains. The franc slipped 0.2 per cent to 1.2342 per euro.
The cost for European banks to fund in dollars shrank from the most expensive since 2008 after the central banks said on Wednesday they woud cut the rate on dollar liquidity swap lines.
The three-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, fell to as low as 1.19 percentage points below the euro interbank offered rate on Thursday. It touched 1.63 percentage points on Wednesday.
The central banks, including the ECB and Bank of Japan, agreed to reduce their rate to the dollar overnight index swap rate plus 50 basis points, or half a percentage point, from 100 basis points, the Fed said in a statement.The euro rose as high as $1.3548 on Friday, the strongest intraday level since November 22, on optimism European central banks may funnel loans through the International Monetary Fund to fight the debt crisis.
The region's finance ministers gave the go-ahead for work on the IMF plan at a meeting on Tuesday.
The proposal could deliver up to €200 billion to fight the debt crisis, said the people, who declined to be named because talks are at an early stage.
European Union leaders meet on Friday in Brussels to address the euro region's debt crisis.Futures traders increased bets the euro will fall against the dollar, data from the Washington-based Commodity Futures Trading Commission show. So-called net-short wagers rose to 104,302 in the week ended Tuesday, the most since June 2010.
