The euro rose against the dollar, as a dearth of negative news about Europe's debt troubles helped stabilize the common currency.
Newly-appointed Italian Prime Minister Mario Monti won a parliamentary confidence vote that gave him a broad mandate for economic reform. That helped drive Italy's bond yields back below 7 per cent, the psychologically-charged level where Greece and Portugal were once forced to seek international assistance.
Italy's roughly EUR 2 trillion debt is widely viewed in the market as too big to rescue, and the euro had dropped sharply when the 7 per cent yield was first reached last week.
Late Friday, the euro was at $1.3522 from $1.3456 a day earlier, according to EBS via CQG.
The common currency was supported by speculation that the European Central Bank and International Monetary Fund might find a way to collaborate in order to backstop Italy. Neither institution would confirm, but the idea appears to be gaining traction, analysts said.
The central bank has reluctantly agreed to use its emergency facility to buy distressed debt in a limited fashion. But the ECB and Germany are vociferously opposed to the central bank using its balance sheet to bail out indebted euro zone countries, or printing money in order to monetize the debt.
"It's basically printing money like the Federal Reserve's quantitative easing," said Chris Fernandes, vice president and foreign exchange advisor at Bank of the West.
A bailout of Italy "should be handled within the euro zone without the IMF, but certainly if they offered aid this would be a positive," Fernandes said.
Analysts say the euro zone's woes are far from resolved. As Italy has transfixed most investors, Spain's debt has also come under pressure. An auction this week saw the country's bond yields surge dangerously close to 7%, only tempered by heavy buying by the European Central Bank.
The euro's rally Friday "is all about wishful thinking," said Paresh Upadhyaya, FX strategist at Bank of America Merrill Lynch in New York.
So long as the ECB is the only buyer of troubled debt, bond yields will stay locked in a "decisive upward trend" that will hurt the euro and send investors into the relative safety of the greenback, Upadhyaya said.
However, the dollar faces problems of its own next week.
A Congressional committee has until November 23 to come out with measures to cut U.S. debt by $1.2 trillion over the next 10 years, or face automatic cuts. Democrats and Republicans on the committee remain far apart over the amount of new revenue to include in any deficit reduction package.
The dollar was at Y76.95 from Y76.98, while the euro was at Y103.90 from Y103.60. The U.K. pound was at $1.5801 from $1.5753. The dollar was at CHF0.9148 from CHF0.9221.
The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 78.026 from about 78.282.
Newly-appointed Italian Prime Minister Mario Monti won a parliamentary confidence vote that gave him a broad mandate for economic reform. That helped drive Italy's bond yields back below 7 per cent, the psychologically-charged level where Greece and Portugal were once forced to seek international assistance.
Italy's roughly EUR 2 trillion debt is widely viewed in the market as too big to rescue, and the euro had dropped sharply when the 7 per cent yield was first reached last week.
Late Friday, the euro was at $1.3522 from $1.3456 a day earlier, according to EBS via CQG.
The common currency was supported by speculation that the European Central Bank and International Monetary Fund might find a way to collaborate in order to backstop Italy. Neither institution would confirm, but the idea appears to be gaining traction, analysts said.
The central bank has reluctantly agreed to use its emergency facility to buy distressed debt in a limited fashion. But the ECB and Germany are vociferously opposed to the central bank using its balance sheet to bail out indebted euro zone countries, or printing money in order to monetize the debt.
"It's basically printing money like the Federal Reserve's quantitative easing," said Chris Fernandes, vice president and foreign exchange advisor at Bank of the West.
A bailout of Italy "should be handled within the euro zone without the IMF, but certainly if they offered aid this would be a positive," Fernandes said.
Analysts say the euro zone's woes are far from resolved. As Italy has transfixed most investors, Spain's debt has also come under pressure. An auction this week saw the country's bond yields surge dangerously close to 7%, only tempered by heavy buying by the European Central Bank.
The euro's rally Friday "is all about wishful thinking," said Paresh Upadhyaya, FX strategist at Bank of America Merrill Lynch in New York.
So long as the ECB is the only buyer of troubled debt, bond yields will stay locked in a "decisive upward trend" that will hurt the euro and send investors into the relative safety of the greenback, Upadhyaya said.
However, the dollar faces problems of its own next week.
A Congressional committee has until November 23 to come out with measures to cut U.S. debt by $1.2 trillion over the next 10 years, or face automatic cuts. Democrats and Republicans on the committee remain far apart over the amount of new revenue to include in any deficit reduction package.
The dollar was at Y76.95 from Y76.98, while the euro was at Y103.90 from Y103.60. The U.K. pound was at $1.5801 from $1.5753. The dollar was at CHF0.9148 from CHF0.9221.
The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 78.026 from about 78.282.
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