LONDON, Jan 14, 2011 – The European single currency forged a one-month peak on Friday, as this week\’s successful bond auctions in Italy, Spain and Portugal soothed concerns over the eurozone debt crisis, dealers said.
In early morning deals, the euro jumped to $1.3457 — which was the highest level since December 14. It later stood at $1.3368 from $1.3358 in New York late on Thursday.
"The US dollar dropped sharply against the euro on the heels of strong sovereign debt auctions and rhetoric from the European Central Bank," said analyst David Rodriguez at trading site DailyFX.
"A lull in market jitters over the stability of the eurozone suggests that the euro could continue to retrace losses against the safe-haven US dollar."
Spain proved it can tap the financial markets for money, selling its maximum target of 3.0 billion euros ($3.9 billion) in five-year bonds with demand outstripping supply by two-to-one.
Italy soothed European debt concerns, too, raising its maximum target of 6.0 billion euros in bonds Thursday.
"Following the successful Portuguese bond auction on Wednesday, Spain and Italy managed to achieve similar results yesterday," said PVM analyst Tamas Varga in London.
"The two countries raised 9.0 billion euros in the latest round of bond offerings. As a result the euro strengthened against the dollar."
The shared eurozone unit also rallied following Thursday\’s hawkish comments from ECB President Jean-Claude Trichet on inflation.
After the central bank announced it would keep its main interest rate at a record low of one percent for a 20th straight month, Trichet told journalists:
"It is absolutely crystal clear that we will always do what is necessary to deliver price stability."
"We are never pre-committed not to move interest rates," he added.
In a separate development on Friday, China\’s central bank said it would raise the amount of money that banks are required to keep in reserve, the latest in a series of such hikes aimed at reining in high inflation.
The bank reserve requirement ratio would be raised by 50 basis points beginning on January 20, the People\’s Bank of China said in a statement.
Ever fearful of inflation\’s potential to spark social unrest, Beijing has been pulling on a variety of levers to rein in consumer prices and calm growing anxiety about soaring food costs and property values.
In December, the central bank hiked interest rates for the second time in less than three months.
In London on Friday, the euro changed hands at $1.3368 against $1.3358 late in New York on Thursday, at 110.73 yen (110.60), £0.8444 (0.8436) and 1.2882 Swiss francs (1.2875).
The dollar stood at 82.83 yen (82.79) and 0.9640 Swiss francs (0.9635).
The pound was at $1.5831 (1.5834).
On the London Bullion Market, the price of gold dropped to $1,368.50 an ounce from $1,381.50 late on Thursday.