Euro edges higher against US dollar on reduced Deutsche Bank fears

[NEW YORK] The euro recovered from a nine-day low against the US dollar on Friday on reduced concerns surrounding Deutsche Bank's health, while the greater calm over Germany's biggest lender pressured the safe-haven yen and Swiss franc.

Deutsche Bank's US-listed shares were last up nearly 15 per cent after touching record lows on Thursday. The immediate cause of the Deutsche crisis is a fine, disputed by the bank, of up to US$14 billion by the US Department of Justice over its sale of mortgage-backed securities.

An AFP news agency report that the bank was nearing a cut-price settlement of US$5.4 billion helped the euro recover after the currency fell to a nine-day low of US$1.1153 around the start of the US trading session.

"There seems to be reduced pessimism at least for the outlook for Deutsche," said Shaun Osborne, chief FX strategist, at Scotiabank in Toronto. He said the euro was finding strong demand between US$1.1150 and US$1.1160.

The euro was on track to gain about 0.8 per cent in September to notch its best month in six and rise 1.2 per cent for the third quarter after losing 2.4 per cent in the second quarter.

The US dollar was last up 0.34 per cent against the yen at 101.35 yen after hitting a session high of 101.75 yen.

The Japanese currency was still set to gain about 1.8 per cent against the US dollar for the quarter to notch its third straight quarterly gain. Investors' suspicions that the Bank of Japan had reached a practical limit in stimulus and lost clout in cheapening the yen helped boost the currency over the quarter.

Soothed concerns surrounding Deutsche Bank helped the US dollar hit a nine-day high against the safe-haven Swiss franc of 0.9752 franc and reverse Thursday's losses.

The US dollar was last up 0.49 per cent against the franc at 0.9707 after hitting a more than one-month low of 0.9635 on Thursday.

"It is less painful for Deutsche Bank than some people feared," said Axel Merk, president and chief investment officer of Palo Alto, California-based Merk Investments. He cited the greater calm as a key reason for the franc's losses Friday.

The US dollar index, which measures the greenback against a basket of six major currencies, was last down 0.09 per cent at 95.449.

China's yuan was steady against the US dollar, and last traded at 6.6745 in the onshore spot market. The yuan will formally become a global reserve currency on Saturday.

REUTERS