Forex: Weekly’s review

On Monday the 17-nation euro erased its drop versus the dollar and yen as European politicians attempted to craft an effective response to the region’s sovereign debt crisis.The yen rose versus the dollar as Japan’s exports increased 2.4 percent in September from a year earlier as demand for cars and auto parts advanced. Japanese Finance Minister Jun Azumi and Chief Cabinet Secretary Osamu Fujimura signaled today Japan is ready to intervene in the currency market to stop a yen appreciation to post-World War II highs that may stunt shipments as overseas demand slows.

On Tuesday canada’s dollar fell to C$1.0154 versus the U.S. currency after the Bank of Canada said the nation’s economy will grow more slowly than projected and removed a reference to withdrawing stimulus. The target lending rate was held at 1 percent, where it has been since September 2010. New Zealand’s dollar declined 1.2 percent to 79.74 U.S. cents as the South Pacific nation’s consumer prices increased 0.4 percent in the third quarter after rising 1 percent in the prior three months. The data fueled speculation the Reserve Bank of New Zealand will signal a willingness to keep its benchmark interest rate at a record low.

On Wednesday the euro fell versus the dollar and yen after reports that talks on bondholder losses of Greek debt were deadlocked added to concern efforts to remedy the European crisis are stalling. The European Union is seeking voluntary participation by banks in a second bailout package for Greece, though a forced solution can’t be ruled out. But the 17-nation euro touched the strongest in more than six weeks on news Germany’s lower house of parliament voted to expand the region’s bailout, later. The pound snapped five days of gains against the dollar as waning confidence in the euro-area and business optimism plunged to the lowest level in 2 1/2 years.

On Thursday the euro rallied to a seven-week high against the dollar after European leaders agreed to an expansion of a rescue fund for indebted nations and reached an accord with lenders on writedowns for Greek debt. The euro rose after European leaders meeting for the second time in four days persuaded bondholders to take 50 percent losses on Greek debt and boosted the firepower of a rescue fund for indebted nations to 1 trillion euros ($1.4 trillion). The yen rose to a record versus the dollar for the fourth time in five days day on speculation Bank of Japan measures announced today will fail to contain the currency’s rally. The yen strengthened even after the Bank of Japan expanded its credit and asset-purchase programs to a total of 55 trillion yen ($724 billion) from 50 trillion yen to damp the currency’s appreciation, which harms exporters.

On Friday the euro declined from almost a seven-week high against the dollar and yen as a rise in Italian borrowing costs raised concern European Union leaders haven’t done enough to stem the region’s debt crisis. Europe’s currency weakened after posting its biggest gain in a year against the greenback yesterday, when leaders announced a way to prevent a Greek default and safeguard banks. Italian Prime Minister Silvio Berlusconi conducted the first test of investor enthusiasm for Europe’s debt since the summit’s plan was announced, selling bonds today at euro-era record borrowing costs.