Euro, shares rise ahead of U.S. Fed decision

Wed Jan 30, 2013 7:46am EST
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By Marc Jones

LONDON (Reuters) - The euro hit its highest level in over a year and shares and commodities also rose on Wednesday helped by optimism about the global economy ahead of a U.S. Federal Reserve policy decision.

The Fed is expected to maintain asset buying at $85 billion a month when it concludes its meeting later and stick to its commitment to hold interest rates near zero until unemployment falls to at least 6.5 percent.

Ahead of the decision, a rise in European economic confidence, ECB crisis loan repayments and Italy's solid sale of five and 10-year bonds provided investors with fresh evidence of a better sentiment in the region.

The euro broke above $1.35 for the first time since December 2011.

European shares were down 0.3 percent by 1125 GMT, but an earlier rise in Asian equities meant the MSCI world share index was holding firm at a new 21-month high.

U.S. stock futures suggested a steady start on Wall Street where focus will be on the Fed's outlook for the economy and its bond buying program after it sounded slightly more hawkish last month.

Alongside the recent rebound in confidence in the euro zone, one of the drivers behind the recent spike has been the eagerness of banks to repay the crisis loans they took from the European Central Bank just over a year ago.

Banks returned 137.2 billion euros of those loans on Wednesday and surprised analysts again by also trimming their three-month funding despite predictions they would use it to partly restock their coffers.   Continued...

Electronic information boards display market information at the London Stock Exchange in the City of London January 2, 2013. REUTERS/Paul Hackett