The euro gained before European Union leaders met to discuss how to contain the debt contagion that has threatened the single currency. The 16-nation euro appreciated against 14 of the world’s 16 most traded currencies monitored by Bloomberg. EU leaders start a two-day summit in Brussels today with the focus on a permanent crisis-fighting system. The Swiss franc declined after the central bank kept interest rates on hold. “It could be euro positive if they put together something concrete that at least in the short term eases market concerns on how far the peripheral debt issues will spread,” said Adam Cole, head of global currency strategy at RBC Capital Markets in London. The euro gained 0.3 percent to $1.3249 at 9:31 a.m. in London, snapping two days of declines. The common currency was little changed against the yen at 111.27. The dollar declined 0.2 percent to 84.01 yen. EU leaders are close to agreeing on an amendment to the bloc’s Lisbon Treaty foreseeing a “mechanism to safeguard the stability of the euro area as a whole” with financial aid for distressed governments “subject to strict conditionality,” officials told reporters yesterday. Divisions between leaders over action to stifle the debt crisis have helped push the euro 2.1 percent lower in the past month against the currencies of 10 developed nations tracked by Bloomberg Correlation-Weighted Indexes. Spanish ‘Vulnerability’ Moody’s Investors Services yesterday said Spain’s credit rating may be cut from Aa1, citing “vulnerability to funding stress.” Spain has to raise 170 billion euros ($225 billion) next year, while refinancing needs for its regions total 30 billion euros and for banks around 90 billion euros, Moody’s estimated. A bailout isn’t “likely,” it said. Spain issued 4.85 percent bonds due 2020 and 4.65 percent 2025 notes today. Portuguese government bonds declined yesterday as costs rose at a sale of three-month bills. The Swiss franc slumped after the nation’s central bank held the three-month Libor target rate at 0.25 percent, in line with the estimates of all 19 economists in a Bloomberg News survey. The franc’s strength against the euro, which hit a record high yesterday, has threatened the country’s export-led recovery. The franc was 0.2 percent weaker against the common currency at 1.2821, after strengthening yesterday to a euro-era record of 1.2759. U.S. Housing Starts The dollar traded near a three-month high against the yen before data that economists said will show U.S. housing starts and building permits rose last month. U.S. housing starts rose to a 550,000 annual rate in November from 519,000 in October, according to the median estimate of economists in a Bloomberg News survey before the Commerce Department releases the data today. Building permits, a sign of future activity, gained 1.5 percent to a 560,000 rate last month, another Bloomberg survey showed before today’s data. Treasury 10-year yields yesterday increased to as high as 3.56 percent, the most since May, on speculation President Barack Obama’s agreement to extend tax cuts will pass in Congress, supporting growth and increasing the budget deficit. The yields dropped five basis points today to 3.47 percent. To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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