The euro was the clear outperformer among major currencies on Tuesday as investors continued to pin their hopes on policy action from the European Central Bank to bolster economic growth and help combat the region's debt crisis.
Investors shrugged off remarks by Germany's central bank against the proposed purchases of government bonds by the European Central Bank.
Italian and Spanish bonds yields eased a bit and the euro broke past the key 1.24 mark against the dollar today ahead of a crucial week of meetings with eurozone leaders, which could determine Greece's future and the stability of the eurozone's shared currency.
Results from the Spanish T-bill auction braced risk-sentiment further, with the yields on the 18 month Treasuries falling by 90 basis points from the period prior. Overall, Spain auctioned a slightly higher-than estimated range of 4.515 billion of T- bills.
While the market is watching the euro developments closely, the People's Bank of China injected 220 billion yuan or $34.6 billion into the banking system via reverse-repurchase operations in order to improve liquidity and bolster a slowing economy.
German Foreign Minister Guido Westerwelle stressed yesterday that his country wants Greece to continue implementing reforms and tough cost-cutting measures it had earlier agreed while availing two massive international bailout loans for avoiding bankruptcy.
Investors are also focusing on the release of the minutes of the Federal Reserve's July 31st-August 1st meeting, which is due for release tomorrow.
While noting that the weakest euro-zone nations likely to face rating downgrades unless finding substantial crisis resolutions, Fitch ratings managing director David Riley said in a bloomberg interview that the ECB may commence its rate capping plan irrespective of any German objections.
The euro broke past the key 1.24 level against the dollar after a gap of 2-weeks, rising as much as 1.2429 by 6:10 am ET. The euro-buck pair is staying a few pips shy of its near-term resistance zone of 1.2440/50 that broke earlier this month.
The common currency climbed to 98.69 against the yen, its strongest level since July 6. This was well above its fresh lows of 94.14 hit late July. Further risk-rally could push the pair above the key 100-mark after a gap of more than 1-1/2 months.
Eurozone's single currency also advanced against the pound in early deals, hitting a 1-week high of 0.7883 around 6:10 am ET. The next barrier for the euro-pound pair is seen around the 0.7910/15 area.
The U.K. public sector net borrowing, excluding the temporary effects of financial interventions, (PSNB ex) increased in July, data from the Office for National Statistics showed today.
Net borrowing was GBP 0.6 billion in July, which was GBP 3.4 billion higher than in July last year when PSNB was -GBP 2.8 billion. In 2011-12, PSNB ex was GBP 125 billion, which was GBP 15.7 billion lower than in 2010-11.
The euro has been trading in its familiar range against the Swiss franc, moving between 1.2019 and 1.2011. The pair has never broken the SNB ceiling of 1.20 since its intervention on September 2011.
by RTT Staff Writer
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