* Euro recovers, supported by optimism on Greek aid package
* Solid euro zone data helps; Greek bond spreads narrow
* U.S. weekly jobless claims fall in latest week
The euro rose on Thursday, rebounding from a one-year low the previous day, on hopes a bailout plan for Greece was imminent and would help it avoid a debt restructuring.
Gains were limited, however, as details of the Greece package were thin, leaving uncertainties about the timing and implementation of any deal.
Germany’s largest opposition party said it would move quickly to approve German participation, while European Union Economic and Monetary Affairs Commissioner Olli Rehn said the EU should complete talks “within days.” [ID:nBAT005360] [ID:nBRU010773]
Rehn said, however, he still could not provide details of the deal, which he said were “conditional on fiscal consolidation.”
“The market seems slightly more comfortable today, with the expectations of an imminent aid package, to go euro-bargain hunting at these levels,” said Matthew Strauss, a senior currency strategist at RBC Capital Markets in Toronto.
In morning trading in New York, the euro EUR= rose 0.3 percent against the dollar to $1.3258. Earlier it rose to as high as $1.3280.
“People tend to forget that just a couple of months ago the euro was trading at $1.50. For some type of investors, buying some euros back at $1.32 is more than justified,” Strauss said.
The single currency rebounded from a one-year low around $1.3112 hit on Wednesday after Standard & Poor’s cut Spain’s credit rating by one notch, a day after downgrades to Greece and Portugal.
But the low was hit only briefly, with investors focusing on comments from a German parliamentarian that the aid package for Greece would be worth 100 billion to 120 billion euros ($133 milllion to $158.5 billion) over three years. [ID:nBAT005353]
“The market sees a bigger package for Greece, covering three years, as a bigger backstop. This is helping to address some investor fears and giving some support for the euro,” said Kenneth Broux, market economist at Lloyds Banking Group in London.
The euro was also supported by euro zone economic sentiment jumping much more than expected in April, pointing to strengthening economic activity. [ID:nLDE63S0O1]
Spreads between Greek and German bond yields also narrowed on optimism over prospects for a bailout, while an Italian bond auction passed relatively smoothly. [GVD/EUR] [ID:nTAR001527].
FOMC, JOBLESS CLAIMS
In the United States, a statement from the Federal Reserve on Wednesday offered a more upbeat view of the U.S. economy, helping boost risk sentiment and weighing on the safe-haven U.S. dollar and low-yielding yen.
At the conclusion of its two-day rate setting committee meeting on Wednesday, the Fed maintained its pledge to keep interest rates low for an “extended period” and slightly upgraded some of its economic forecasts. [ID:nN27125552]
But Thursday, a government report showed the number of U.S. workers filing new applications for unemployment insurance fell slightly less than expected last week. [ID:nN28206933]
“Claims have still not taken out their late March low, and the improvement in the labor market remains slow,” Alan Ruskin, head of currency strategy at RBS Global Banking & Markets, said in a note.
But Ruskin added that claims data will have little bearing on a market “where all the focus is still on the euro periphery.”
The dollar index .DXY traded down 0.3 percent at 82.116 after a rally to a near one-year high of 82.714 on Wednesday.
The yen was flat versus the dollar JPY= at 94.03 yen, while euro/yen EURJPY=R rose 0.4 percent to 124.70 yen. (Additional reporting by Jessica Mortimer in London; Editing by Padraic Cassidy)
By Vivianne Rodrigues
Tags: banks, Capital economics, economy, european union, Federal Reserve, financial, financial markets, interest rates, investors, monetary, us economy
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