Single currency regains ground as debt worries ease By William L. Watts and Lisa Twaronite, MarketWatch LONDON (MarketWatch) — The euro gained some ground on the dollar Thursday, finding support as Italy and Spain sold bonds and as investors awaited European Central Bank chief Jean-Claude Trichet’s monthly news conference. The yield premium demanded by investors to hold peripheral euro-zone bonds over benchmark German bunds narrowed on reports that European officials are looking to boost rescue resources as well as the auctions by Italy and Spain, which followed Portugal’s sale of government debt on Wednesday. That helped lift the euro, said strategists, who nonetheless emphasized that progress on finding a solution to the euro-zone’s debt problems will be crucial to providing any long-term support for the single currency. “It will only be possible to prevent [contagion spreading to other countries] once the bailout mechanism caps risk premiums effectively,” said Ulrich Leuchtmann, currency strategist at Commerzbank in Frankfurt. The euro (EURUSD 1.3172, +0.0042, +0.3199%) traded at $1.3167, up from $1.3129 in late North American trading Wednesday. See real-time currency quotes and tools. “Although the ECB is unlikely to alter its policy settings, there will plenty of attention on President Trichet’s press statement and comments about ECB bond buying,” said Mitul Kotecha, head of global foreign-exchange strategy at Credit Agricole, in a note to clients. The British pound (GBPUSD 1.5778, +0.0017, +0.1079%) saw little movement versus the dollar after the Bank of England left its key lending rate unchanged at a record low 0.5% and kept its asset-purchase program on hold at 200 billion pounds ($315 billion). Read about Thursday's monetary-policy decisions. The pound rose to $1.5785 from $1.5602 late Wednesday. The dollar index (DXY 79.92, -0.12, -0.15%) , which tracks the greenback against a basket of six major rivals, stood at 80.037, up from 80.016 late Wednesday. Against the yen, the dollar (USDYEN 82.9700, +0.0300, +0.0362%) edged down to ¥82.99 from ¥83.25 late Wednesday. Dollar sentiment got a lift earlier in the session after the release of data showing Japanese core machinery orders, considered a leading indicator of corporate capital investment, fell 3.0% in November from October. That compared with economists’ expectations for a rise. Read more on Japan core machinery orders. The Australian dollar (AUDUSD 0.9982, +0.0020, +0.2008%) erased earlier weakness to trade at 99.81 U.S. cents, up from 99.58 cents late Wednesday. The South Korean won initially rose after the Bank of Korea surprised markets by raising its policy interest rate by a quarter of a percentage point, to 2.75%, with the U.S. dollar easing below the 1,111-won level. Read more on South Korea rate hike. But the won quickly recovered and was trading at 1,113.95 won in the afternoon, up 0.3% from Wednesday. Reports cited foreign-exchange traders as saying South Korea authorities appear to have directly intervened in the currency market to stem the won’s gains. Among other Asian currencies, China’s central bank set the dollar-yuan parity rate at 6.5997 Thursday, a record low for the second straight day. It was set at 6.6128 Wednesday, ahead of Chinese President Hu Jintao’s state visit to the U.S. next week.

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