LONDON (ShareCast) - The euro rallied to its best level in a month on Tuesday as investors took heart from a relatively successful Spanish bond sale while the dollar declined on fears that the Federal Reserve will extend stimulus measures.

Market nerves were soothed as Spain sold 12 and 18 month debt at yields of over 5% and is expected to sell between €1bn and €2bn of bonds on Thursday.

The euro hit a session high of $1.2730 before later trading at $1.2683, up 0.9% from the previous session.

The single currency was also boosted by speculation that Germany may approve using the Eurozone's bailout funds to buy the sovereign debt may of struggling European countries.

Heightened fears about the Eurozone were also soothed by news that Greece appears close to forming a three-party coalition government and as optimism grows that Greece can renegotiate bailout terms.

Much of Tuesday's focus fell on the Federal Reserve, which began a two-day monetary policy meeting in Washington. Expectations are high that the central bank will decide to continue its current easing policy. Fed chairman Ben Bernanke is scheduled to give a press conference on Wednesday after the Fed concludes its meeting.

The dollar index, which measures the US currency against a basket of six others, declined to 81.364 from 82.002 on Monday.

Against the Japanese yen, the euro traded at ¥100.14 from ¥99.47 while the greenback bought ¥79.06 from ¥79.12 the previous session.

Sterling bought $1.5740 compared to $1.5668 on Monday.



CJ

Email this article to a friend

or share it with one of these popular networks:

• DIGG
• FACEBOOK
• STUMBLEUPON
• MIXX
• YAHOO BUZZ
• DELICIOUS
• REDDIT
• NEWSVINE