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The euro erased gains against the dollar as Ireland’s parliament neared a vote on austerity measures that are required to qualify for an 85 billion-euro ($113 billion) aid package.
The Irish vote comes as European leaders continue to discuss how to contain the region’s debt crisis from spreading to other nations.
Ireland’s parliament will vote on its budget around 7 p.m. in Dublin. The budget must be passed for an 85 billion-euro aid package to go into effect. The government was forecast to win approval for austerity measures after independent lawmaker Michael Lowry said late yesterday he will support the budget.
Irish Finance Minister Brian Lenihan said in a speech to the Irish parliament in Dublin that there are “clear signs of hope” as the economy gathers strength.
“We’re getting near the Irish budget vote so we’re seeing a bit of profit-taking ahead of that,” said Kathy Lien, director of currency research at GFT Forex.
Luxembourg Prime Minister Jean-Claude Juncker said late yesterday after chairing the ministers’ meeting that his group would “do everything to secure the financial stability in the euro zone.”
The yen fell from a three-week high against the dollar after President Barack Obama broke a stalemate about extending middle-class tax cuts introduced by the administration of George W. Bush.
Obama said he would accept lower tax rates on high earners’ income, dividends, capital gains and multimillion dollar estates for the next two years in exchange for extending federal unemployment insurance. The current tax rates, enacted in 2001 and 2003, are set to increase Dec. 31.
"The increase in taxes may further widen the budget deficit", said Alan Ruskin at Deutsche Bank AG. “These kinds of agreements ultimately don’t support the idea of fiscal consolidation,” Ruskin said. “That’s a point of particular caution.”
Canada’s dollar dropped, erasing earlier gains, after the Bank of Canada held the benchmark interest rate steady at 1%. It said it will remain careful about future interest- rate increases as falling exports and Europe’s sovereign debt crisis hinder the economic recovery.
The pound rose against the dollar after U.K. manufacturing expanded twice as much as economists forecast in October and retail sales climbed, boosting demand for British assets.
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