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Euro lifted in Asia by France-Germany plan

SINGAPORE, Oct 10 – The euro rose above $1.34 in Asia on Monday after France and Germany vowed swift action to shore up Europe’s struggling banks.

The single European unit bought $1.3477 in afternoon trade compared with $1.3375 in New York late Friday, while it sat at 103.4336 yen from 103.10 yen.

The greenback traded at 76.75 yen from 76.73 yen.

The euro fell below $1.34 late Friday after Fitch downgraded the ratings of Italy and Spain, citing increasing pressure on the two countries as efforts to stabilise their public finances are made even more difficult by the eurozone debt crisis.

But Emmanuel Ng, currency economist of OCBC Bank in Singapore, told AFP the “market is attempting to push the euro higher against the dollar”.

Ng said the euro rally was led by traders encouraged by a promise from German Chancellor Angela Merkel and French President Nicolas Sarkozy on Sunday that action would be taken to recapitalise troubled lenders within weeks.

“I think it’s just from the spillover from the weekend comments arising out of the Merkel-Sarkozy meeting so it’s just newsflow regarding the potential (bank) recapitalisation plans,” he said.

Without announcing concrete details of the plans, Sarkozy said there would be “lasting, global and quick responses before the end of the month”, amid rampant fears of a crippling credit crunch.

The news could ease concerns over a lack of direction in the eurozone leadership. France and Germany, the two main powerhouses of the bloc, had been at odds over the best way to recapitalise the region’s banks.

It also comes a few weeks ahead of a G20 summit in Cannes, at which Sarkozy said Europe must “arrive at the (meeting) united and with the problems resolved”.

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Against the Asian units, the dollar fell to Sg$1.2894 from Sg$1.2946 on Friday, to 1,171.3 South Korean won from 1,178.90, and to Tw$30.42 from Tw$30.52.

The dollar also slipped to 43.43 Philippine pesos from 43.51, but rose to 8,977 Indonesian rupiah from 8,955 and to 30.94 Thai baht from 30.87.

– Dow Jones Newswires contributed to this story –

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