In These New Times

Yahoo

26th January, 2011

LONDON (AFP) – The euro rose Wednesday after a successful bond auction to raise cash for a bailout fund for debt-ridden eurozone nations, and ahead of an interest rate call from the US FederalReserve, dealers said.

In London deals, the shared eurozone unit rallied to $1.3722 — the highest level since November 22. It later stood at $1.3701, up from $1.3682 in New York late on Tuesday.

Against the Japanese currency, the greenback eased to 82.13 yen from 82.18 yen on Tuesday.

The European Financial Stability Facility (EFSF) staged a landmark five-year bond auction worth five billion euros ($6.8 billion) on Tuesday to raise funds for Ireland and help calm financial markets.

Later on Wednesday, the focus will switch to the outcome of the US Federal Reserve’s latest monetary policy meeting, with a decision due at 1915 GMT.

“The euro has continued to benefit from more positive sentiment with respect to yesterday’s EFSF bond issue which attracted some good demand out of Asia,” CMC Markets analyst Michael Hewson said on Wednesday.

Asian bidders snapped up more than one third of the total in what EFSF head Klaus Regling said demonstrated market confidence in the 17-nation eurozone, after the turmoil of massive bailouts for Greece and Ireland last year.

“This must be seen as a big success,” Regling told a press briefing near Frankfurt after the figures were released.

“It may well be a turning point” in the eurozone debt crisis, he added.

Demand for the first debt issue by the facility, which was set up last June, was “record breaking,” with bids for 44.5 billion euros, almost nine times the amount on offer, an EFSF statement said.

Also Wednesday, the dollar was hampered after US President Barack Obama called, in his State of the Unionspeech, for a freeze in federal discretionary spending

“The greenback suffered as President Obama called for a freeze on non-security discretionary spending during his State of the Union speech last night,” added CurrenciesDirect analyst Philip Ryan.

Eyeing the ever-swelling US debt, Obama vowed sweeping reforms to government, while warning political foes against spending cuts that would undermine the economy.

Obama said Washington must now acknowledge budget constraints, but insisted lawmakers should wield a scalpel rather than an axe when tackling spending.

Market reaction to the address was limited, however, since almost all of the key points were known in advance, dealers said.

In London on Wednesday, the euro changed hands at $1.3701 against $1.3682 in New York late Tuesday, at 112.53 yen (112.46), £0.8634 (0.8651) and 1.2959 Swiss francs (1.2890).

The dollar stood at 82.13 yen (82.18) and 0.9458 Swiss francs (0.9416).

The pound was at $1.5867 (1.5814).

On the London Bullion Market, the price of gold rose to $1,335.82 an ounce from $1,324 late on Tuesday.