Euro Recovers from 16-month Low - 10.1.2012

US Dollar Asian stocks rose following modest gains of the major US stock indices on stronger US and Australian economic reports. Japanese Nikkei advanced 0.4% to 8422.26, while US S&P 500 increased 0.23% to 1280.70. Consumer borrowing in the US surged in November by the most in 10 years, showing households are optimistic enough to take on debt and banks are willing to lend. The amount of credits increased by 20.4 billion dollars, the biggest advance since November 2001, to 2.48 trillion, the Federal Reserve reported. The dollar weakened against the majors on a positive sense – the currency’s index dropped to 80.80 from a multi-month high 81.37. Euro The euro rose after German Chancellor Angela Merkel and French President Nicolas Sarkozy met in Berlin to continue developing new fiscal rules for the euro area. At a joint press conference Merkel told reporters “the negotiations are coming along well” while Sarkozy said the talks may “finish in the days ahead and for the treaty to be signed on March 1.” Nevertheless investors are still deeply concerned. Yesterday Germany raised 3.9 billion euros in short-term debt that had an average negative yield of 0.0122%, the first time in history that yields at a German debt auction moved into negative territory, the Wall Street Journal informs. The euro climbed a bit higher against the dollar, staying in the morning just below 1.28. Swiss Franc The franc surged to the highest level since September against the euro – pair EUR/CHF fell today to 1.2105, after Philipp Hildebrand, the former head of the Swiss National Bank, announced his resignation due to a suspicious trade of his wife just before the bank set a cap for the currency’s exchange rate against the euro in September 2011. Thomas Jordan, acting president of the central bank, is facing challenge to show that the scandal does not mean change in the monetary policy direction. The SNB has also confirmed that “the current monetary policy with a minimum exchange rate of CHF 1.20 against the euro remains unchanged” and “will be pursued further with the utmost determination.”