Euro jumps in London

The euro rose against the dollar on Friday as speculation the European Central Bank may start lending to the International Monetary Fund to bail out bigger eurozone economies helped lift the embattled bloc's currency. The euro has been under sustained pressure in recent weeks as funding costs for major eurozone states Italy and Spain reached danger levels and the debt crisis even threatened to engulf France, endangering the entire currency project.
The ECB is widely seen to be the only institution with the firepower to stop the rot and some policymakers have urged it to take a more activist role, which top bank officials and bloc power broker Germany have so far refused to countenance. The shared currency extended gains to rise more than 1 percent on the day to a high of $1.3615 on trading platform EBS, although markets players said appetite to sell on upticks remained high. Investors closing short positions to book profit ahead of the weekend helped boost the euro in early trade, before a series of stop-loss orders were triggered around $1.3550, accelerating the single currency's climb.
The euro was last up 1 percent at $1.3602, pulling away from a five-week low of $1.3421 struck on Thursday. Traders cited good offers in the $1.3515-20 region. On the downside, support lies at around $1.3405, the 76.4 percent retracement of last month's rally from around $1.3145 on October 4 to a high of $1.4248 on October 27.
Speculation that talks on the ECB lending to the IMF have gained traction in the past few days. On Thursday, European officials said there have been discussions about the central bank possibly lending to the global lender, which would give it enough money to bail out bigger eurozone countries.
Pressure is mounting on the European Central Bank to step up its bond-buying programme with Italian and Spanish bond yields close to unsustainable levels and plummeting demand from other, real-money investors. Bond market experts polled by Reuters saw a 50/50 chance that the ECB will expand bond purchases to engage in outright quantitative easing.
Prospects for the euro dimmed this week on signs the crisis was spreading to core eurozone countries such as France, with most investors still looking to sell into every rally. With most investors preferring safety, the yen outperformed the dollar. The dollar dipped to a two-and-a-half week low against the yen of 76.58 yen. The Swiss franc also outperformed the dollar, pushing dollar/Swiss franc down 1.3 percent on the day to 0.9095 francs. As a result of a slight pick up in risk appetite, the dollar index was down 0.7 percent to 77.689.