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The dollar fell to its weakest in almost a week against the euro as stocks rose amid speculation policy makers are moving closer to resolving a deadlock on U.S. borrowing and to finding an agreement on Europe’s debt crisis.
Spanish and Italian bonds rose a second day before French President Nicolas Sarkozy and German Chancellor Angela Merkel meet to seek common ground on tackling the region’s debt woes.
“Hope springs eternal,” said Sebastien Galy, a senior foreign-exchange strategist at Societe Generale SA in London. “Equities are probably going to continue to do quite well and since the main funding currency is the dollar, the net effect is going to be dollar-negative.”
Euro-area leaders are preparing for the second meeting in a month to hammer out a solution to the Greek debt crisis, which pushed the euro to $1.3837 last week, the lowest level since March. Sarkozy will dine with Merkel in Berlin today before the debt summit in Brussels tomorrow
The gathering could be a “make-or-break moment” for the euro region, Greek Prime Minister George Papandreou said in an interview.
The yield on 10-year Italian bonds fell 13 basis points to 5.60 percent and the Spanish 10-year yield was 14 basis points lower, at 5.96 percent.
Officials are considering steps previously rejected by Germany, including the use of precautionary credit lines, to prevent the crisis spreading, a person close to the talks said.
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