Euro stays higher

The euro rose against the dollar for a second straight session on Tuesday in cautious trade on talk the European Central Bank could lend money to the International Monetary Fund to help stem the debt crisis. The eurozone is discussing the option of financing emergency help for Italy or Spain by using money from national central banks to boost International Monetary Fund resources - but only as a last resort, eurozone officials said.
Eurozone ministers struggled to ramp up the firepower of their rescue fund and raised the possibility of asking the IMF for more help on Tuesday after Italy's borrowing costs hit a euro lifetime high of nearly 8 percent. Talk of an ECB/IMF deal implies that the Europeans are really having trouble coming up with any new schemes to stabilise the region, according to Kathy Lien, director of currency research at GFT Forex in Jersey City, New Jersey.
"The rally in the euro today was sparked by what would normally be extremely negative news for the currency." While Italy successfully sold 3-year and 10-year bonds it had to pay yields at levels that most said are too burdensome. Indeed, yields were above levels at which Greece, Ireland and Portugal were forced to apply for international bailouts.
In late afternoon New York trade, the euro was up 0.1 percent at $1.3328, after earlier rising nearly 1 percent to a session high of $1.3442, initially on hedge fund buying.
Eurozone finance ministers agreed on Tuesday to release aid payment for debt-burdended Greece, an EU diplomat said. The ECB, meanwhile, failed to attract enough deposits from banks that would neutralise its purchases of bonds from debt-ridden eurozone countries, which investors took to mean that the central bank had effectively launched a round of quantitative easing because it increased the amount of euros in the market. Marc Chandler, global head of FX strategy at Brown Brothers Harriman, was among analysts who believed that it was not quantitative easing at all, adding that the imbalance must occur on a continued basis to be considered monetary easing. Against a currency basketthe dollar fell 0.4 percent to 78.984. The dollar fell 0.2 percent against the yen at 77.84.