The Euro strengthens against the Yen and dollar as stocks rally

The euro gained against the yen, as Asian stocks extended a global rally, encouraging investors to buy higher-yielding assets. Europe’s single currency approached the highest level against the yen since December after Handelsblatt reported European Central Bank Executive Board member Juergen Stark saying there was limited room for more interest-rate cuts. “The fact the euro-zone nations have been able to avoid making any fresh commitments to spend even more money should, at the margins, prove encouraging to investors in Europe and, as a result, the euro,” Simon Derrick, chief currency strategist in London at Bank of New York Mellon, wrote in a research note today. The EUR/JPY is currently trading at 127.95 as of 8:30am, GMT.

Sterling extended gains against the dollar on Monday, rising to a one-week high as share prices gained sharply led by financials as gains in share prices and news that British bank Barclays may sell its iShares unit boosted appetite for the UK currency. Meanwhile, the Bank of England will conduct a second auction as part of its so-called "quantitative easing" policy of boosting the money supply. "It reflects a degree of optimism in the market, we've seen an extension of the rally in equity markets, and that is helping to boost the pound," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ. The GBP/USD is currently trading at $1.4050 as of 8:45am, GMT.

The dollar’s advance over the past two months may come to an end should the Federal Reserve decide to buy Treasuries, helping to ease a global shortage of dollars, according to Societe Generale SA. “A Fed decision to purchase long-term Treasuries would significantly ease the tight supply conditions for the dollar,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA. “That will lower the source of demand for dollars and hurt the currency.” The Dollar Index, which tracks the greenback performance against the currencies of six major U.S. trading partners, has fallen 1.8 percent since reaching a three-year high on March 4. The EUR/USD is currently trading at $1.2980 as of 8:55am, GMT.

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