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Euro gains after ECB vows to act on loan rate

Published 22/08/2012

The euro has climbed to a two-week high against the dollar after the European Central Bank said it would take action to lower the rate at which Spain and Italy's governments borrow money.

Uncertainties over the effectiveness of ECB bond-buying and worries over the euro zone's debt and economic problems were expected to limit the euro's gains however, and keep it hemmed below this month's high of $1.2443.

Talk of ECB intervention in debt markets resurfaced after a weekend report in Germany's Spiegel magazine that the central bank would target specific yield levels as part of any bond-buying programme.

The ECB tried to quash that speculation on Monday but traders cited a story in The Daily Telegraph saying it could confirm the reports that ECB experts were examining plans to effectively cap Spanish and Italian yields.

The euro rose to $1.2438, its highest since August 7, and close to the August 6 peak of $1.2443.

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