Euro Advances as IMF Said to Seek $1 Trillion
Wednesday, 18 January 2012 | 12:45
The euro advanced for a second day against the dollar and the yen as the International Monetary Fund was said to seek a $1 trillion expansion of its lending resources to safeguard the global economy.
The 17-nation currency strengthened against all except two of its 16 major counterparts before Greek Prime Minister Lucas Papademos resumes negotiations with bondholders over proposed losses today. The dollar weakened before U.S. reports that economists said will show industrial production and confidence among homebuilders increased, damping demand for the safety of the greenback. The pound fell against the euro as a report showed the British unemployment rate rose to a 16-year high.
“The news that the IMF will probably get more money and could increase its lending capacity is one factor supporting the euro,” said You-Na Park, a foreign-exchange strategist at Commerzbank AG in Frankfurt. “Short-term risk sentiment seems to be improving.”
The euro advanced 0.7 percent to $1.2829 at 10:56 a.m. London time, after rising 0.5 percent yesterday. Europe’s shared currency climbed 0.6 percent to 98.48 yen. The dollar was little changed at 76.77 yen.
The Washington-based IMF is pushing China, Brazil, Russia, India, Japan and oil-exporting nations to be the top contributors, according to an official of a Group of 20 nation, who spoke on condition of anonymity because the talks are private. The fund wants the agreement struck at the Feb. 25-26 meeting of G-20 finance ministers and central bankers in Mexico City, the official said.
IMF Managing Director Christine Lagarde said yesterday her staff are studying options to increase the fund’s war chest beyond the current $385 billion. While euro-region nations have already pledged to contribute 150 billion euros, the U.S. has said it has no plans to make new bilateral loans and G-20 leaders ended last year at odds over the issue.
Greece will resume talks today with the Institute of International Finance, which represents private creditors. The Washington based IIF broke off negotiations last week after failing to agree with the government about how much money investors will lose by swapping their bonds.
The Greek government is nearing a deal with bondholders that would give them cash and securities with a market value of about 32 cents per euro of debt, according to Bruce Richards, chief executive officer of New York-based Marathon Asset Management LP, who is on the committee of 32 creditors.
“I’m highly confident the deal will get done,” Richards said in an interview yesterday with Bloomberg Businessweek.
The euro has weakened 3.9 percent in the past six months, according to Bloomberg Correlation-Weighted Indexes. The yen rose 8.1 percent, the best performer among the 10 developed- nation currencies tracked by the gauges. The dollar strengthened 6.4 percent.
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