Forex: Weekly’s review

On Monday the euro strengthened to an almost three-week high against the dollar as French Finance Minister Francois Baroin said negotiations between Greece and its private creditors are making “tangible progress.” The 17-nation currency gained versus 13 of its 16 major counterparts tracked by Bloomberg as European Union finance ministers gather in Brussels to discuss a Greek debt swap, budget rules and a financial firewall to protect indebted nations.

On Tuesday the dollar rose, reaching the highest level this year against the yen, as European policy makers and Greek bondholders failed to reach an agreement on a debt-swap plan for the indebted nation, spurring safety demand. The yen fell against 12 of 16 major peers tracked by Bloomberg after the Bank of Japan cut its economic growth forecast for next year. The euro reached the highest level in almost four weeks against the yen earlier after a report showed European services and manufacturing industries unexpectedly expanded in January.

On Wednesday the dollar fell to the weakest level in a month against the euro after the Federal Reserve extended its pledge to hold its target for the federal funds rate low until late 2014 amid a “highly accommodative” monetary policy. The central bank had previously pledged to keep its rate target in place until mid-2013. Nine of 17 Federal Reserve officials expect borrowing costs will remain below 1 percent at the end of 2014, with six officials expecting zero rates to remain into 2015.

On Thursday the dollar weakened versus all its 16 most-traded counterparts as the Federal Reserve’s pledge to keep interest rates at a record low for longer than originally forecast spurred investors to seek higher yields. The U.S. currency touched a five-week low against the euro after policy makers said yesterday the benchmark interest rate would stay low until at least late 2014 from mid-2013 and as Italian yields fell to a six-week low. The euro rallied earlier as Italian 10-year yields fell below 6 percent for the first time since Dec. 8. The nation sold its maximum target at an auction of zero-coupon and inflation- linked debt.

On Friday the euro gained for a fifth day against the dollar, the longest streak in three months, after European Union Economic and Monetary Affairs Commissioner Olli Rehn said Greece was “close” to reaching agreement with its creditors. The 17-nation currency extended gains after a report showed U.S. consumer confidence this month was the highest in almost a year. The euro was supported as Italy sold bills, benefitting the European Central Bank’s efforts to fight the spread of the debt crisis by shoring up banks.