The euro advanced after European Union leaders agreed on a retooled bailout plan for the region’s most indebted nations.
The 17-nation currency rose for a second day against the dollar after regional leaders agreed during the weekend to widen the scope of a rescue fund aimed at resolving the debt crisis and cut the cost of loans to Greece.
“The European accord is quite significant and a better outcome than the market was expecting so that will be a positive for the euro,” said Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. “With the European Central Bank looking to hike rates in April the euro could be ripe to break that key $1.40 level in the near term.”
The ECB’s governing council is scheduled to meet March 17.
The yen erased a gain against the dollar as Japan’s central bank said it will add 15 trillion yen ($183 billion) to the financial system and increase its asset-purchase program following last week’s earthquake.
BOJ Governor Masaaki Shirakawa and his board also doubled the facility that buys assets from government bonds to exchange- traded funds to 10 trillion yen. Besides the 15 trillion yen of emergency funds deployed, the central bank offered to buy 3 trillion yen of government bonds from lenders in repurchase agreements starting March 16.
Borrowing costs were cut near zero in 2008 as officials sought to revive growth and end deflation. Finance Minister Yoshihiko Noda said earlier today that he’s closely watching the foreign exchange, stock and Japanese bond markets.
“The yen reached 80.62 and we bounced off of that as the Bank of Japan responded with flooding the market with liquidity,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co.. “The yen will consolidate around these levels until we get a clearer picture.”
Australia’s dollar slid. Traders have cut bets the Reserve Bank of Australia will raise interest rates over the next year.
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