Euro rallies as Greece gets debt relief

Athens:  The euro rallied from a 10-month low against the dollar after Greece received a promise of aid to tackle its record debt burden. Ten-year Treasuries rebounded from three days of losses.

The 16-nation currency strengthened almost 1 per cent against the dollar in trading yesterday. The yield premium investors demand to hold Greek 10-year bonds rather than benchmark German securities narrowed for a second day and the Athens Stock Exchange's ASE Index climbed as much as 3.2 per cent.

The Stoxx Europe 600 Index declined 0.5 per cent, while futures on the Standard & Poor's 500 Index advanced 0.2 per cent. The yield on the 10-year Treasury note slipped 3 basis points. Nickel rose for a second day and oil added 0.5 per cent.

Support

European leaders backed a Franco-German proposal yesterday for a mix of International Monetary Fund and bilateral loans for Greece, saying the nation probably won't need outside help to cut the region's biggest budget deficit. Even with yesterday's rebound, US government bonds are headed for the biggest weekly loss this year after bidding waned at three auctions and 10-year interest-rate swap spreads stayed negative.

"Investors see the agreement as a backstop, and it is helping sentiment towards the euro," said Simon Derrick, chief currency strategist at Bank of New York Mellon in London, of the Greek accord reached in Brussels.

"However, this is a rather uninspired recovery and it's difficult to say that this is an unequivocal vote of confidence."

The euro gained against all of the 16 most-traded currencies tracked by Bloomberg, while the yield on the two-year Greek note tumbled 38 basis points to 4.46 per cent. The Dollar Index snapped a three-day advance, declining 0.4 per cent to 81.822.

Forward contracts on China's yuan strengthened the most in a week after Fan Gang, an adviser to the country's central bank, said the nation may resume a so-called managed float of the currency, while avoiding an abrupt revaluation that would harm exports.

Twelve-month non-deliverable forwards rose 0.14 per cent to 6.6725 per dollar in Hong Kong, according to data compiled by Bloomberg. The contracts reflect bets the currency will strengthen 2.3 per cent from the spot rate of 6.8270.

The MSCI World Index of 23 developed nations' stocks gained 0.1 per cent. Stocks weakened in Eur-ope. Unipol Gruppo Finanziario sank 8.9 per cent in Milan after Italy's third- largest insurer announced a share sale and posted a full-year loss.

Veolia Environnement, the world's largest water company, slipped 1.4 per cent in Paris after JPMorgan Chase advised selling the stock.

The MSCI Asia Pacific Index increased 1 per cent, its biggest advance in more than a week. Japan's Nikkei 225 Stock Average rose to the highest level since October 2008 and the Shanghai Composite Index rallied 1.3 per cent.

China led the MSCI Emerging Markets Index 0.3 per cent higher, its first gain in three days. Russia's Micex Index climbed 0.6 per cent after the central bank cut its main refinancing rate for the 12th time in less than a year, lowering it a quarter point to 8.25 per cent.

The gain in US futures indicated the S&P 500 may rise for the first time in three days. Confidence among US consumers fell in March for a second month, economists said before the Reuters/University of Michigan final consumer sentiment index due in New York later yesterday.

The US economy expanded at a 5.9 per cent annual rate in the final three months of 2009, according to the median estimate of economists surveyed before revised figures from the Commerce Department are released in Washington.

Consumer spending may have increased at a 1.7 per cent pace.

Treasuries rose, trimming their biggest weekly loss this year, as some investors were lured by yields at a nine-month high.

The decline in yields narrowed the spread with swaps to negative 6.9 basis points, from negative 7.3 basis points on Thursday. The spread went negative this week for the first time since at least 1988, when Bloomberg began collecting the data.

Nickel for delivery in three months rose 2.2 percent to $23,325 a metric tonne on the London Metal Exchange, extending its gain this year to 26 per cent.

Copper, zinc and tin also advanced. Gold for immediate delivery added 0.6 per cent to $1,097.15 an ounce. Crude oil rose 41 cents to $80.94 a barrel in New York trading.

Stock index futures trading on April 16

China will begin trading futures contracts of its benchmark Shanghai-Shenzhen 300 Stock Index on April 16, according to a statement yesterday by the China Financial Futures Exchange.

The first contracts to trade will be for May, June, September and December. Investors must pay cash deposits equivalent to 15 per cent of the contract value for May and June contracts, while the longer-term contracts need 18 per cent deposits, the statement said.

China's first stock index contracts, agreements to buy or sell the CSI 300 Index at a preset value on an agreed date, are designed to allow investors to bet on and profit from both gains and declines in the market.