Euro Rises to 2-Week High (Video)

The euro rose against the dollar for a third consecutive session, hitting a two-week high following successful bond auctions by France and Spain.

The auctions were the latest sign that financial conditions in the euro zone are improving despite problems with sovereign debt. The euro reached $1.2972 late in the session, its highest point since Jan. 4.

Analysts warned that conditions still could deteriorate quickly, particularly if debt restructuring negotiations between the Greek government and private creditors break down. Spain, too, is struggling to meet deficit-reduction targets.

"While funding strains in Spain have eased significantly, the fiscal backdrop has worsened," said Nicholas Spiro, managing director at Spiro Sovereign Strategy. "Spain is a story of two halves at the start of 2012: an increasingly buoyant bond market in the face of a significant deterioration in the country's public finances."

A drop in weekly U.S. initial jobless claims to their lowest level since April 2008 also kept a lid on the euro's rally. Positive U.S. economic data reduces the chances that the Federal Reserve will implement new stimulus measures, which would weaken the dollar against other currencies.

Late Thursday in New York, the euro was at $1.2969 from $1.2864 late Wednesday. The dollar bought ¥77.11, up from ¥76.83. The euro also rose for a third day against the yen, coming off near-record low levels that some worried could trigger currency-market intervention by Japanese authorities. The euro rose to ¥99.99 compared with ¥98.83. The British pound rose to $1.5489 from $1.5438. The dollar bought 0.9320 Swiss franc compared with 0.9397 franc late Wednesday.

Before the bond sales, investors had worried that Standard & Poor's downgrade of both countries' credit ratings would make borrowing more difficult. But both Spain and France paid lower funding costs for most of their bonds, and Spain's €6.61 billion ($8.5 billion) sale far exceeded its target amount. France also garnered strong demand in separate fixed-rate and inflation-linked bond auctions.

"Dealers just see value on the French paper," said Annalisa Piazza, economist at Newedge. "Further downgrades are very unlikely near term."



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