Euro holds firm on central bank liquidity moves

TOKYO: The euro firmed against the dollar and yen in Asia Thursday after moves by major central banks to pump liquidity into the global financial system amid increasing worries over Europe's debt crisis.

The common unit traded at $1.3445 and 104.40 yen in Tokyo morning trade, up from $1.3438 and 104.25 yen in New York late Wednesday.

The dollar was at 77.65 yen, compared with 77.58 yen.

On Wednesday, the US Federal Reserve, the European Central Bank, and the central banks of Britain, Japan, Canada and Switzerland announced they would make cheaper US dollars available to liquidity-starved commercial banks.

The offering would last until February 2013 as part of a concerted effort to avert a depression and further social unrest that could be sparked by the eurozone crisis.

The action drove a new surge of confidence in the markets with the euro hitting a one-week peak of $1.3533 on Wednesday, from a level around $1.3300 moments before the news.

The announcement, which triggered a rally on Wall Street, came after European Union Economic and Monetary Affairs Commissioner Olli Rehn warned that European leaders had 10 days to save the euro or risk the union's disintegration.

The arrangement allows the central banks to lend dollars to commercial banks that might be finding it hard to borrow them directly from other lenders and is aimed at easing tensions in the crucial interbank lending market.

But the move "does not alter the underlying problems," National Australia Bank said, with eurozone finance chiefs struggling to boost the firepower of a bailout fund for indebted members at a key gathering in Brussels on Tuesday.

While they were unable to increase the European Financial Stability Facility to one trillion euros from 440 billion euros, they did give the fund new powers and called for help from the International Monetary Fund. (AFP)