November 30th, 2011

FOREX – The euro struggled for a direction Wednesday in Asia as euro-zone finance ministers agreed on details to expand the bloc’s bailout fund but acknowledged it would have less capacity to help troubled nations than once hoped.

The ministers approved two measures for increasing the firepower of the European Financial Stability Facility, the bloc’s bailout fund.

Under one measure, the EFSF would fund so-called “protection certificates” to be attached to new bonds issued by troubled euro-zone countries. The certificates would entitle holders to claim 20% to 30% of the bond’s face value in case of default.

“The meeting was closely watched, but nothing really fresh came out,” Atsushi Hirano, head of FX sales in Japan at the Royal Bank of Scotland, said, adding that the EFSF development was “a small positive.”

The single currency was also supported by expectations of a potential Italy bailout, dealers said.

Talks may start next month on a EUR400 billion package for Italy, with the International Monetary Fund standing ready to provide EUR100 billion, if the euro-zone bailout fund and European central banks can provide another EUR300 billion, senior euro-zone and IMF officials said late Tuesday.

The hurdle for the ECB to chip in looks high, said a senior dealer at a Japanese bank, “but if the ECB shifts away from a cautious stance to give more funds, that could boost the euro in the short term.”

The euro mildly gained versus the dollar soon after the outcome of the euro-zone finance minister’s meeting, but the risk-sensitive common currency subsequently gave up most gains as Asian stocks weakened.

Meanwhile, euro-zone finance ministers gave the go-ahead to their EUR5.8 billion share of an EUR8 billion tranche of bailout funding for Greece. The IMF is expected to approve its EUR2.2 billion share on Dec. 5.

Focus now shifts to a meeting of European Union finance ministers for debt crisis talks and U.S. economic indicators such as Automatic Data Processing private jobs data later in the global day.

Amid Europe’s debt crisis, “the anti-euro sentiment continues,” but recent strength in other risk-sensitive currencies such as the Australian dollar, the Canadian dollar and the British pound is limiting the downside of the common currency, Royal Bank of Scotland’s Hirano said.

Meanwhile, the dollar rose versus the yen early in Asia on expectations for bids from Japanese importers, but later gave up gains on selling from Japanese exporters and other Asian investors, dealers said.

The euro was at $1.3327 as of 0450 GMT from $1.3316 late Tuesday in New York, according to EBS. The euro was at Y103.81 from Y103.69.

The dollar was at Y77.89 from Y77.93 and at CHF0.9199 from CHF0.9208. The U.K. pound was at $1.5596 from $1.5590.

The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 79.026 from 79.048.

Interbank Foreign Exchange Rates At 2350 EST / 0450 GMT

Latest       Previous   %Chg    Daily    Daily   %Chg
Dollar Rates                               Close            High      Low  12/31

USD/JPY Japan            77.88-90       77.90-94  -0.04    78.11    77.88  -3.98
EUR/USD Euro            1.3327-30      1.3313-17  +0.10   1.3358   1.3310  -0.47
GBP/USD U.K.            1.5593-96      1.5593-98  -0.01   1.5628   1.5584  -0.09
USD/CHF Switzerland    0.9199-204      0.9206-10  -0.07   0.9219   0.9186  -1.59
USD/CAD Canada          1.0322-28      1.0316-21  +0.06   1.0332   1.0300  +3.79
AUD/USD Australia       1.0014-18      1.0000-05  +0.14   1.0085   1.0000  -2.13
NZD/USD New Zealand     0.7624-30      0.7608-14  +0.21   0.7663   0.7604  -2.17

Euro Rate
EUR/JPY Japan           103.81-84      103.72-81  +0.06   104.12   103.74  -4.43

Source: ICAP Plc.

-By Kosaku Narioka, Dow Jones Newswires.

–Tatsuo Ito contributed to this article.