Forexpros – The euro extended gains against the U.S. dollar on Tuesday, rising to a one-week high but gains were capped amid concerns over the ongoing debt crisis in the single currency bloc.
EUR/USD hit 1.3090 during European early afternoon trade, the pair’s highest since December 13; the pair subsequently consolidated at 1.3065, rising 0.50%.
The pair was likely to find support at 1.2982, Monday’s low and resistance at 1.3144, the high of January 12.
The euro’s gains came after German research institute Ifo said its Business Climate Index rose to a seasonally adjusted 107.2 in December from 106.6 the previous month, confounding expectations for a decline to 106.0.
Elsewhere, Spain saw short-term borrowing costs fall sharply at a well received auction of government debt.
Spain’s Treasury sold more than the targeted amount of EUR4.5 billion amid solid investor demand, auctioning EUR7 billion of three-month bonds at an average yield of 1.73%, down from 5.11% at a similar auction last month.
Meanwhile, EUR1.92 billion of six-month bonds were sold, at an average yield of 2.43%, down from 5.22% in November.
But investors remained wary after European Central Bank President Mario Draghi reiterated Monday that the bank’s bond purchasing program was temporary and warned the region’s economy was likely to enter a recession by early next year.
European Union finance ministers agreed Monday to provide EUR150 billion in loans to the International Monetary Fund to help tackle the region’s debt crisis, but fell short of the overall EUR200 billion target.
The euro was lower against the pound, with EUR/GBP shedding 0.32% to hit 0.8359.
Later Tuesday, the U.S. was to publish official data on building permits as well as a report on housing starts.
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