EU Pledging Support For Greece Helps Stocks Gain For The First Time In Five Weeks, But Euro Still Suffers

DailyMarkets.com (New York) - In the forex markets, the Euro fell for a fifth straight week versus the US dollar despite the International Monetary Fund (IMF) and the European Central Bank (ECB) pledging support for Greece. On Thursday, a statement issued by European leaders revealed very few details on how they plan to help Greece tide over its debt crisis. There are concerns on how the EU would react to a new wave of speculative attacks on Greece, Spain and Portugal, countries in the Eurozone which are finding it difficult to cut their budget deficits.

The Euro fell to 1.3532 against the US dollar on Friday, the lowest since May 20. This fifth week of losses marked the longest streak in over a year. However, against the Japanese yen, the Euro gained 0.4% to 122.62, ending its four-week losing streak. Traders are waiting for the outcome of a February 15-16 meeting of EU finance ministers which could provide more details of a Greece bailout.

The US dollar rose versus the Japanese yen after Federal Reserve Chairman Ben Bernanke said the central bank may raise the discount rate “before long” as economic stimulus measures are unwound.

US stock markets managed to rise for the first time in five weeks on news that European officials pledged to help Greece cut its budget deficit. For the week, the S&P 500 gained 0.9% to 1,075.51, cutting its 2010 correction to 3.6%, and the Dow rose 0.9% to 10,099.14. So far, US stocks have recouped almost half of their declines since February 4.

Meanwhile China announced plans to limit inflation. It instructed banks to set aside more deposits as reserves for the second time in a month after loan growth surged and property prices shot up. Now investors are concerned that tighter lending standards would crimp the global economic recovery.