The euro opened the week higher versus Friday’s close in reaction to news that the International Monetary Fund is preparing a huge loan deal for Italy. Italian newspaper La Stampa reported over the weekend that a 600 billion euro loan for Italy is in the works to help Italy deal with its debt burden. This gave investors confidence that European policy makers are taking steps to stem the debt crisis.
However, just as the European markets were opening, the IMF denied such reports. A spokesperson for the Washington based organization said today in an e-mailed statement that the fund is not in any discussions with Italian authorities on a program for IMF financing.
Euro opened the Asian session by gaping higher at 1.3321 against the dollar compared to Friday’s close of 1.3230. EURUSD hit as high as 1.3362 by 9:00 GMT despite the IMF denied reports about aid to Italy.
Optimism in the euro may be due to investors focusing on the upcoming Eurogroup/Ecofin meetings on Tuesday and Wednesday this week. Market players are hoping the meetings will signal more progress on expanding the eurozone EFSF rescue fund. There is also optimism that there will be progress on the ongoing push towards deeper fiscal integration in the euro zone.
One negative that could come out of the Euro group meetings is Germany’s stubborn unwillingness to create so called joint euro zone bonds.
Italian and Spanish bond yields continue to rise to euro-era highs today, with Italian yields surging past the critical 7 percent level.