Euro Climbs on Improving Outlook
Positive developments in Spain lifted the euro, which touched its highest level against the dollar in more than four weeks.
Currencies that benefit from global growth, including the Australian and Canadian dollars, also received a boost after data showed continuing improvement in the U.S. housing sector.
The better outlook led investors to sell traditional havens, including the dollar and yen. Both the Australian and Canadian dollars gained against the greenback on expectations that increased orders for commodity exports needed to fuel economic expansion will keep those currencies in demand.
Late Wednesday in New York, the euro was at $1.3120 from $1.3055 late Tuesday and is up 2% versus the dollar this month. The dollar was at ¥78.97 from ¥78.89. The U.K. pound was at $1.6148 from $1.6111. The dollar bought 0.9224 Swiss franc from 0.9260 franc on Tuesday.
Senior euro-zone officials told The Wall Street Journal on Wednesday that European governments hope to earmark less than €100 billion ($131 billion) from their bailout fund for a Spanish rescue. Markets have been waiting for Spain to follow through with a formal bailout request for weeks, and any sign that an agreement is closer has tended to help the euro.
“If Spain goes ahead and asks for help, it’s pro-euro,” said Matthew Lifson, a senior trader at Cambridge Mercantile Group, which provides corporate hedging services.
Meanwhile, housing starts in the U.S. jumped in September to their highest level in more than four years, the Commerce Department said Wednesday. Retail sales and consumer-confidence reports in the U.S. over the past week have also beat expectations.
“The housing starts were quite surprising, and it’s providing a boost to a lot of currencies,” said Charles St-Arnaud, a vice president in foreign-exchange research at Nomura Securities in New York. “Sentiment has been improving.”
The main loser of the day was the yen, and investment bank Nomura’s foreign-exchange strategy team said it expects the dollar will continue to strengthen against the Japanese currency in coming months, as the Bank of Japan faces more pressure to loosen monetary policy to make the country’s exports more competitive.
“The market is expecting more action by the BOJ,” said Masafumi Takada, a foreign-exchange trader in New York at BNP Paribas.
—Matthew Dalton contributed to this article.
Write to Matthew Walter at Matthew.Walter@dowjones.com