Euro up on Spain bailout rumours

The euro hit a high of seven weeks yesterday on the back of rumours that Spain is talking to Eurozone leaders about the possibility of a bailout package. The common currency hit a high of $1.2589 on Thursday, the fourth consecutive day that a slight increase has been seen by investors.

According to experts, Spain is keen to discuss the conditions of a potential bailout. Sources close to the matter told Reuters that leaders would prefer that government bonds were purchased in primary auctions by the European rescue fund, before the ECB moves to lower yields in secondary auctions.

The euro was also helped against the dollar by the minutes of the most recent meeting of the Federal Exchange, which suggested that a third wave of quantitative easing could be introduced to the US quite soon. In addition, surveys of business sentiment in both Germany and France suggested that there is still hope in the European marketplace.

This week has seen lots of movement in Forex markets as Eurozone leaders thrash out an agreement on whether or not Greece will be allowed more time to make the cuts required of it under the conditions of its bailout package. Prime Minister Antonis Samaras has been in Berlin to ask for two more years to implement the harsh and highly unpopular reforms.

In a united front, however, Francois Hollande and Angela Merkel joined together yesterday to tell Samaras that he can expect little leeway on the bailout agreement if he does not stick to reform plans. A report due from lending trio the troika will, however, most likely influence the final decision on whether an extension will be granted.