Euro near 3-week high before Sarkozy, Merkel meet

The euro traded 0.3 percent from a three-week high on prospects a meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel will result in action to contain the region’s debt crisis. The dollar was 0.7 percent from its lowest in two weeks against the yen before data that may show US housing starts dropped last month. The Australian dollar slid after minutes of the Reserve Bank’s last meeting showed policy makers kept interest rates unchanged on concern global economic growth may slow. Canada’s currency weakened as as a decline in oil prices curbed prospects for the nation’s energy exports.“The euro is supported by the expectation that something will be decided at tonight’s meeting between France and Germany’s leaders on the pan-European bond issue,” said Imre Speizer, an Auckland-based strategist at Westpac Banking Corp., Australia’s second-largest lender. “The euro is trading higher mainly because of better risk sentiment.”The euro was at $1.4433 as of 12:53 p.m. in Tokyo from $1.4445 in New York yesterday, when it touched $1.4477, the most since July 27. The euro fetched 110.94 yen from 110.97 yen. The dollar bought 76.87 yen from 76.83. It dropped to 76.31 yen on August 11, the least since August 1 and near its post-World War II record of 76.25 set in March.The Australian dollar fell to $1.0484 from $1.0507. Canada’s currency, known as the loonie, lost 0.2 percent to 98.08 cents per US dollar. Calls are growing for Merkel and Sarkozy to discuss joint borrowing or a mutual guarantee among the 17 euro states, policies that Germany and France have previously rejected. The issue is likely to come up at their press briefing scheduled for 6:30 p.m. Paris time after the talks.The two leaders will focus on proposals to tighten enforcement of EU budget rules and expand coordination of national economies, according to French Finance Minister Francois Baroin.The European Central Bank spent a record amount on government bonds last week as it began buying Italian and Spanish securities to stem the region’s debt crisis. Policy makers said yesterday they settled purchases worth €22bn ($32bn) in the week through August 12, more than the 15 billion-euro median estimate in a Bloomberg News survey of economists and strategists.“That the ECB is showing unprecedented, albeit reluctant, support for European bond markets is encouraging,” for the euro, Adam Myers, a senior foreign-exchange strategist at Credit Agricole Corporate & Investment Bank in London, wrote in a note to clients today.The dollar maintained a three-day drop versus the euro before a report today forecast to show the US housing market remains weak. The Commerce Department will say housing starts dropped 4.6 percent to a 600,000 annual pace in July, according to the median forecast of economists in a Bloomberg News survey. The dollar has slumped 6.5 percent so far this year, the worst performer among the 10 currencies tracked by Bloomberg Correlation-Weighted Indexes. The Swiss franc is the biggest gainer with 14 percent, benefiting from investor demand for a refuge amid the euro area’s debt woes and Standard & Poor’s downgrade of the USFederal Reserve Bank of Atlanta President Dennis Lockhart said yesterday the central bank could purchase more Treasuries or alter its balance sheet if the economy were to slow further. The Fed completed $600 billion of bond purchases in June, its second round of so-called quantitative easing, or QE2.“The US may need to hammer out more accommodative measures like a possible QE3 if job and housing markets remain weak,” said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd., which provides foreign-exchange margin-trading services. “The trend of the weaker dollar and stronger yen is likely to continue.” The Fed said in an August 9 statement that it’s prepared to use a range of policy tools to boost the economy, including keeping its benchmark interest rate near zero through mid-2013. The so-called Aussie weakened against 15 of its 16 major counterparts after central bank minutes said that “downside risks to demand had probably increased, as a result of the acute uncertainty in global financial markets.”Reserve Bank Governor Glenn Stevens held the overnight cash rate target at 4.75 percent for a record eighth-straight meeting on August 2.Growth in China, the world’s second-biggest economy and Australia’s largest trading partner, is slowing “significantly,” according to The Conference Board, a New York-based research organization. A leading index for China rose 1 percent in June to 158.9 after a 0.6 percent gain in May, the group said on its website today.Oil dropped from the highest in almost two weeks, with futures for September delivery sliding as much as 0.7 percent to $87.23 a barrel in New York. From / Arabian Business News