Euro surges higher after Draghi pledge on single currency

Thu Jul 26, 2012 9:19am EDT
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NEW YORK (Reuters) - The euro soared against the dollar and other major currencies on Thursday, reversing earlier losses, after European Central Bank chief Mario Draghi said the bank would do whatever it takes to preserve the single currency.

The euro touched a fresh one-week high against the dollar after the number of Americans filing new claims for jobless benefits fell last week to near a four-year low, a hopeful sign for a labor market that has shown signs of weakness and prompting investors to increase risk exposure.

The euro rose 1 percent to a one-week high of $1.2315, using Reuters data, well above a session low of $1.2116 touched earlier in the global trading day before Draghi's comments.

Speaking at a conference in London, Draghi pledged to do whatever was necessary to protect the euro zone from collapse, including fighting unreasonably high government borrowing costs for countries such as Spain and Italy.

But analysts were skeptical the euro's gains would be sustained given worries about the possibility of Spain applying for a sovereign bailout or Greece leaving the monetary union.

"In a heavily biased market, it only takes a little bit of news of the opposite sentiment to provoke quick moves," said Christopher Vecchio, currency analyst at DailyFX. "Such has been the case in the Euro today, which has rapidly appreciated to its weekly high against the US Dollar following constructive commentary from European Central Bank President Mario Draghi today."

Better investor appetite to take on risk dented the safe-haven U.S. dollar, which lost more than 1 percent against the Swiss franc and New Zealand dollars and almost as much against the higher-yielding Australian.

The euro also gained more than 1 percent against the Japanese yen to 96.20 yen.

But analysts said there was little new or of substance in recent comments by policymakers and they expected traders to eventually sell into any rally.   Continued...

A picture illustration shows a 100 Dollar banknote laying on one Dollar banknotes, taken in Warsaw, January 13, 2011. REUTERS/Kacper Pempel