The euro rose against the dollar and yen amid speculation European Central Bank policy makers meeting tomorrow may signal their willingness to act to prevent the spread of the region’s debt crisis. The shared currency gained for the first time in four days versus the dollar as Spanish 10-year government bonds snapped an 11-day decline. ECB President Jean-Claude Trichet said yesterday in Brussels he didn’t believe the region’s financial stability was in question and signaled more bond purchases were possible. European equities and U.S. stock-index futures advanced. “A lot of the fall in the euro has been attributed to the risk premium in the periphery, notably in their credit spreads, and those are coming in today,” said Mark McCormick, a currency strategist at Brown Brothers Harriman & Co. in New York. “We feel it’s going to be short-lived. The policy issues haven’t really changed although there are some rumors the ECB tomorrow might talk about a liquidity enhancement facility.” The euro rose 1.1 percent to $1.3127 at 9 a.m. in New York, from $1.2983 yesterday, when it touched $1.2969, the lowest level since Sept. 15. It fell versus the greenback in the past month by the most among its 16 major peers. The shared currency climbed 1.8 percent to 110.55 yen, from 108.65 yesterday. The dollar appreciated 0.6 percent to 84.22 yen, from 83.69. The euro strengthened 1.2 percent to 1.3181 Swiss francs. The yield on Spanish 10-year debt fell 23 basis points to 5.27 percent. The MSCI World Index rose 0.8 percent and futures on the Standard & Poor’s 500 Index climbed 1.4 percent. ECB Meeting The common currency dropped last month as European leaders struggled to contain a worsening sovereign debt crisis that forced Ireland last week to follow Greece and ask for an international bailout. The ECB’s Governing Council will meet tomorrow amid speculation it will again delay its exit from emergency liquidity measures. All 52 economists surveyed by Bloomberg News expect the central bank to leave its benchmark interest rate unchanged at 1 percent. “I don’t believe that financial stability in the euro zone could really be called into question,” Trichet told lawmakers. The ECB’s bond program is “ongoing” and “we will see what we decide.” European Union governments on Nov. 28 agreed to give Ireland an 85 billion-euro ($111 billion) aid package. In May, the EU set up a 750 billion-euro bailout fund to help rescue Greece. On the same day, the ECB took the unprecedented step of agreeing to buy government bonds. ‘Position Adjustment’ The euro’s gain is a “position adjustment,” said Cliff Tan, head of emerging-market currency research at Societe Generale SA in Hong Kong. “From a medium-term perspective, most risk assets are trading that this particular episode of the European sovereign debt scare is going to be a somewhat moderated version of what we saw in May and June.” The euro may lose a “pillar of support” if the ECB does extend bond purchases, as that may end the perception of policy divergence with the Federal Reserve, according to Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “Any significant increase in ECB purchases of sovereign debt would further undermine the perception of the euro as a hard currency alternative,” he wrote in a client note today. Swiss Franc The Swiss franc fell against 15 of its 16 most-traded counterparts as investors sought higher-yielding assets. The currency has gained 7.2 percent against its major trading partners in the past six months, according to Bloomberg Correlation-Weighted Currency Indexes, making it the second-best performer during the period, after the Australian dollar. South Korea’s won rose from near the lowest since September after government data showed increasing exports and slowing inflation, bolstering optimism for the Asian economy’s outlook. The won rose 0.7 percent to 1,151.25 per dollar, after completing its biggest monthly loss since May. The currency touched 1,172.50 on Nov. 24, the weakest since Sept. 9. The government said today Korea’s exports expanded for a 13th consecutive month in November from a year earlier, while the country’s consumer price growth slowed to within the central bank’s target range, government statistics showed. “Our economic strength is still doing all right,” said Yun Se Min, a currency trader at Busan Bank in Seoul. “But Europe is a problem. If the crisis spreads, that’s going to be a serious problem and the euro may plunge. That will weaken the won too.” To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net; Lucy Meakin in London at lmeakin1@bloomberg.net. To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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