The euro gained against the dollar on Wednesday on signs that European leaders were making headway on containing the region's debt crisis. European Commission President Jose Manuel Barroso set the stage for euro buying in the morning when he pledged the Commission would soon publish a long-promised study on introducing euro area bonds, viewed by some as a potential solution to sovereign debt concerns.
The euro was later buoyed by a joint statement from German and French leaders following a conference call that they are convinced Greece's future is in the eurozone. In late New York trading, the euro was up 0.5 percent at $1.3752 on electronic platform EBS after having climbed as high as $1.37720, a three-day peak. The dollar fell to its lowest level versus the yen since September 2 at 76.64 yen, within the 76.40/77.85 range of the last three weeks. Investors remained wary of possible intervention by Japan to weaken the yen.
"European developments remain central to currency market movements," said Vassili Serebriakov, currency strategist at Wells Fargo in New York. Recent comments by China's Premier Wen Jiabao and US Treasury Secretary Timothy Geithner suggest international pressure on European officials is rising, he said.
"That pressure is understandable given that European events remain the key threat to financial market stability and global recovery at the moment." US Treasury Secretary Timothy Geithner, who will attend a meeting of EU finance ministers in Poland on Friday, expressed confidence in the ability of eurozone leaders to resolve their debt crisis.
The European Union's most senior finance officials will warn ministers this week about the threat of a renewed credit crunch as a "systemic" crisis in sovereign debt spills over to banks. The Dutch finance minister, meanwhile, said the government will do everything it can to save the euro and they had not given up on the rescue for Greece.
Lane Newman, director of FX trading at ING Capital Markets in New York said even though the euro is currently trading around $1.37, "it is very much on the backfoot." He added that "there is a lot of position-liquidation going on," in almost all currencies and the euro was the first to go down as a result. The recovery in the euro doesn't really change its bearish outlook, Newman said. "The question is whether the eurozone bailout fund has enough money to preserve countries such as Germany, France, and Spain, when you take into account the costs to restructuring Greek, Portuguese, and Irish debt."
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