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Euro rises as Spain exceeds sale target, ECB keeps rate at 0.75%

Jan. 10 (Bloomberg) -- The euro strengthened for the first time in three days against the dollar after Spain sold more than the maximum target at its first debt auction of the year, boosting demand for the region’s assets.

The 17-nation currency rose toward an 18-month high versus the yen as the European Central Bank refrained from cutting interest rates at a meeting today amid signs the debt crisis is easing. ECB President Mario Draghi will hold a news conference at 2:30 p.m. in Frankfurt to explain the decision. The yen fell for a second day against the dollar on bets Japanese policy makers will boost stimulus that tends to weaken the currency. Australia’s currency gained after Chinese imports increased.

“The euro has rallied with decent bond sales from Spain,” said Peter Frank, global head of foreign-exchange strategy in London at Banco Bilbao Vizcaya Argentaria SA. “There’s not really appetite for a rate cut yet. The market will be looking to the press conference. If Draghi is less dovish than in December we could see a bit more support for the euro.”

The euro gained 0.3 percent to $1.3108 at 12:47 p.m. London time after dropping 0.4 percent during the previous two days. The shared currency rose 0.7 percent to 115.65 yen after appreciating to 115.99 on Jan. 2, the strongest since July 2011. The yen fell 0.4 percent to 88.20 per dollar.

The Spanish Treasury in Madrid raised 5.82 billion euros from the sale of three bond issues, exceeding its upper target of 5 billion euros. The auctions included a new two-year note with so-called collective-action clauses limiting investors’ rights to oppose writedowns.

ECB Decision

The ECB left its main refinancing rate at a record-low 0.75 percent, as forecast by 50 of 55 economists surveyed by Bloomberg News. Five had predicted a reduction to 0.5 percent.

The euro weakened 0.8 percent against the dollar when the ECB kept borrowing costs unchanged at its previous meeting on Dec. 6, as Draghi told reporters that policy makers had held a “wide discussion” on interest rates.

Luxembourg Prime Minister Jean-Claude Juncker said there are signs the region’s financial crisis is easing.

“The worst probably is over, but what we still have to do is difficult,” Juncker, who has been head of the group of euro- area finance ministers since 2005, told a European parliament committee today in Brussels.

The euro has appreciated 0.9 percent in the past month, according to Bloomberg Correlation-Weighted Indexes, which track the performance among the 10 developed-nation currencies. The yen was the worst performer, dropping 7.8 percent, and the dollar fell 0.6 percent.

Yen Falls

Japan’s currency approached a 2 1/2-year low against the dollar after a draft document obtained by Bloomberg News showed the government expects the central bank to conduct “bold” monetary easing. Bank of Japan Governor Masaaki Shirakawa said yesterday the BOJ was in close cooperation with the government. The central bank next meets on Jan. 21-22.

“Expectations are growing that the BOJ will do something and that is weakening the yen,” said Arne Rasmussen, head of currency research at Danske Bank A/S in Copenhagen. “They may add stimulus at the next meeting.”

The yen will depreciate to 90 per dollar within three months, and may fall more rapidly should the BOJ take action at its meeting, Rasmussen said.

The pound rose for the first time in three days against the dollar after the Bank of England kept its benchmark interest rate at 0.5 percent and left its asset-purchase program at 375 billion pounds ($602 billion).

Sterling gained 0.2 percent to $1.6048.

Aussie Gains

Australia’s dollar strengthened to the highest level in almost four months versus its U.S. counterpart after data showed imports increased in China, the South Pacific nation’s biggest overseas market.

Shipments to China rose 6 percent last month, the customs administration said in Beijing. Economists surveyed by Bloomberg forecast a gain of 3.5 percent respectively.

The so-called Aussie rose 0.6 percent to $1.0574 after appreciating to $1.0587, the most since Sept. 14. The currency gained 0.9 percent to 93.21 yen.

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