Euro looks strong as rescue bonds go to market

The euro rose to the highest in more than two months against the dollar as the European Financial Stability Facility prepared to sell its first bonds, bolstering confidence in the region's response to the sovereign crisis.

The dollar weakened against higher-yielding currencies including the New Zealand dollar and the Swedish krona before a report that is forecast to show that U.S. home prices fell by the most in a year as before Federal Reserve policy makers begin a two-day meeting. The pound weakened against the euro for the sixth-straight day before data predicted to show the economy slowed in the fourth quarter. Australia's currency slid as inflation slowed.

"All indications are that demand will be very, very strong," at the EFSF auction, said Beat Siegenthaler, a currency strategist at UBS AG in Zurich, who said the auction could be four-times oversubscribed. "It will be a supportive factor" for the euro, he said.

The euro was little changed at $1.3641 at 8:44 a.m. in London after reaching $1.3687, the most since Nov. 22. It traded at 112.45 yen from 112.54 yesterday in New York, when it rose to 112.91, the highest since Nov. 23. The dollar weakened 0.1 percent to 82.44 yen.