Forex: Wednesday’s review

Yesterday the euro approached the lowest level against the dollar in more than two weeks after German Chancellor Angela Merkel dimmed expectations European leaders will solve the region’s debt crisis when they meet tomorrow.

The 17-nation currency pared its advance versus the yen after Italian borrowing costs increased at a bill sale. Merkel responded to a Spanish plea by saying joint euro-area bonds are the “wrong way” to achieve integration, while Finance Minister Wolfgang Schaeuble called for stronger fiscal discipline.

Speaking three hours after Spanish Prime Minister Mariano Rajoy made a plea for a two-day summit of European leaders in Brussels to use all available tools to help Spain service its debt, Merkel said euro bonds, euro bills and debt redemption funds are unconstitutional in Germany and economically “wrong and counterproductive.”

The pound fell against all of its major counterparts as U.K. mortgage approvals fell to their lowest level in more than a year. The British pound weakened after the number of loans granted to buy homes dropped 5.8 percent last month to 30,238, the least since April 2011, supporting the case for the central bank to resume an expansion of stimulus measures. Bank of England Governor Mervyn King told lawmakers yesterday he voted for more so-called quantitative easing this month because of a deteriorating global economic outlook.