The dollar rose the most since September against the euro

The dollar rose the most since September against the euro following an agreement to extend and expand tax cuts fueled speculation the U.S. economy will accelerate, driving the stock and bond yields higher and increasing demand for assets denominated in U.S. currency.

The U.S. currency strengthened against most of its counterparts this week as reports showed that applications for unemployment benefits declined, exports increased a sense of two-year high and consumer prices rose. The euro fell against the dollar after Ireland's credit rating was downgraded and the region's political leaders differ on how to stem the debt crisis. The Federal Reserve maintains a policy meeting next week as it continues buying treasury bonds to boost the economy.

"Many of the positive news we've seen outside the U.S. has helped strengthen the dollar," said Mary Nicola, a strategist at BNP Paribas SA in New York. "We have seen the 10-year yields push up. It seems that is helping push the dollar up."

The dollar rose 1.4 percent to $ 1.3226 per euro from $ 1.3414 on Dec. 3. It touched 1.3165 dollars per euro to 09 December, the strongest since Dec. 2. The U.S. currency added 1.7 percent to 83.95 yen, from 82.53 last week. The euro was up 0.3 percent from 111.04 yen from 110.73.

Earnings index

The dollar index, which tracks the greenback against the currencies of six major U.S. trading partners, including the euro, yen and sterling, rose 0.9 percent to 80,107. He got up every day this week, the longest streak since the five days ended Nov. 11.

500 of Standard & Poor's rose 1.3 percent this week.

The dollar has fallen 1.1 percent this year, a measure of the currencies of 10 developed countries,indexes of correlation-weighted currencies. The euro has fallen 9.5 percent. The yen is up 10.8 percent.

The dollar rose after President Barack Obama on 06 December broke a deadlock over extending tax cuts for the middle class made by the administration of George W. Bush. Obama said he would accept lower rates of income tax high earners, dividends, capital gains and multimillion dollar properties for the next two years in exchange for extending federal unemployment insurance and a reduction in one year payroll taxes.

The yield on the benchmark 10-year Treasury reached 3.33 percent yesterday, the highest since June 4.

Euro problems

The euro has fallen 6.9 percent since 04 November when the European Central Bank president said the plans to end the emergency stimulus. The common currency declined this week after Fitch Ratings downgraded Ireland and after German Chancellor Angela Merkel and French President Nicolas Sarkozy in talks yesterday, said they are opposed to increasing the European Union 440 million euros ( $ 581000000000) rescue fund rejected as a whole euro area bonds.

"The euro area has much to do structurally to right the ship," said Carl Forcheski, director of corporate currency sales desk at Societe Generale SA in New York. "We continue to maintain the euro a little defensively."

Fitch lowered the credit rating of BBB + from Ireland to A +, three notches above non-investment grade, citing the mounting cost to rescue the country's banking system.

"Structural weaknesses"

Merkel said there were "structural weaknesses" in the euro area to be addressed. Sarkozy met Merkel in Freiburg, Germany, before a summit on December 16-17 EU. The leaders of the two largest economies in the euro area said that the continued existence of the common currency is "not negotiable."

"If the euro, Europe," Merkel said.

sovereign debt crisis of Europe was held in late 2009 after a new government in Greece said that the budget deficit was twice the previous administration disclosed. nations of the region put together a rescue fund in May, Greece and Ireland have benefited.

The reports showed improvements in the U.S. economy after a report of 03 December showed an unexpected jump in the unemployment rate to 9.8 percent.

The U.S. trade deficit fell 13 percent to 38.7 billion U.S. dollars, less than the lowest estimate of 78 economists surveyed by us and the smallest since January, Commerce Department figures showed yesterday.

Economic output

"That is good news for the U.S. economy and the dollar, if sustained," said Greg Anderson, currency strategist at Citigroup Inc. in New York. "If U.S. yields hold where they have moved to this week, then the dollar should rally."

The index of Thomson Reuters / University of Michigan preliminary consumer sentiment rose in December to 74.2, the highest since June, from 71.6 at the end of last month.

The Australian dollar fell this week on concern inflation tomorrow China will back the data in the case of China to tighten monetary policy. Australia's currency fell 0.8 percent to 98.53 U.S. cents from 99.31 cents on Dec. 3.

The People's Bank of China increased reserve requirements by 50 basis points from December 20, the central bank said on its website today. It is the third increase in five weeks.

"The danger is China raises interest rates sharply, causing a hard landing of China's economy, which obviously would harm Australia's exports," said Derek Mumford, a Sydney-based director in Richford Capital, one of the exchange rate and strong rates of risk management.

Fed officials will leave the benchmark interest rate unchanged at a range from zero to 0.25 percent, according to the 84 estimates in a survey. The central bank will meet on December 14.

The Federal Reserve yesterday announced plans to buy $ 105 billion of Treasuries in 18 rounds from December 13 and ends Jan. 11. The central bank said after its meeting on November 2 to 3 the policy of his intention to purchase an additional $ 600 billion in debt of U.S. government through June to support economic recovery and prevent deflation.