Italy to Cut Deficit

ECB Loans through IMF – Euro Gains

The euro gained against most major peers as Italy advanced a plan to cut its deficit before a European summit on the region’s sovereign-debt crisis.

The 17-nation currency rose versus the dollar after two people familiar with the negotiations said a proposal to channel European Central Bank loans through the International Monetary Fund may deliver as much as 200 billion euros ($268.4 billion) to fight the crisis. The greenback held a two-week climb against the yen after a Dec. 2 report showed the U.S. jobless rate slid to the lowest since March 2009. Malaysia’s ringgit dropped from a three-week high.

The euro rose 0.2 percent to $1.3421 from $1.3391 on Dec. 2, when it completed a 1.2 percent weekly advance. It gained 0.2 percent to 104.65 yen. The dollar traded at 77.97 yen from 77.99 at the end of last week.

German Chancellor Angela Merkel is scheduled to meet French President Nicolas Sarkozy to advance a plan for stricter enforcement of the region’s deficit rules. European Union leaders will hold a summit in Brussels this week.

Italian Prime Minister Mario Monti announced 30 billion euros of austerity and growth measures on 4 December. The premier will present the package, which includes a tax on luxury goods, resurrects a property levy on first homes, and forces many workers to delay retirement, to both houses of parliament on 5 December.

IMF Proposal

At a Nov. 29 meeting attended by ECB President Mario Draghi, euro-area finance ministers gave the go-ahead for work on a plan to recycle national central bank funds through the IMF, said people who declined to be named because the talks are at an early stage. The funds could be used to underwrite precautionary lending programs for Italy or Spain, the two countries judged to be the most vulnerable now, the people said.

The U.S. currency gained 0.3 percent against the yen last week after a 1.1 percent advance in the five days to Nov. 25.

The Malaysian ringgit declined against the dollar before a report that economists said may indicate industrial productionclimbed 1.5 percent in October from a year earlier, after a 2.5 percent gain in September. The government data is due for release on Dec. 8.

The ringgit retreated 0.6 percent to 3.1390 per dollar. The currency reached 3.1155 on Dec. 2, the most since Nov. 9.