The euro gained broadly Monday as signs of fresh steps from the Group of 20 major economies to contain the euro zone debt crisis boosted sentiment, but higher oil prices hurt stocks.
The G20 could agree to boost financing for the International Monetary Fund (IMF) in April if Europeans strengthened their firewall and IMF quota reform was ratified, Brazil's Finance Minister said Sunday. Euro zone countries, on the other hand, pledged to reassess the their bailout fund in March.
Euro zone powerhouse Germany said Saturday the government will decide whether to boost the European bailout fund in March and its parliament is very likely to support any decision for more resources.
The affirmative nuance for beefing up the IMF's funding ability lit the fire on 'risk-on' trade, boosting the euro against the dollar and the yen, said Yuji Saito, director of the foreign exchange division at Credit Agricole Bank in Tokyo.
Recovery in risk positive sentiment is prompting investors to cover positions which they had shorted, he said.
The euro was up 0.2 percent against the dollar at $1.3469, hovering near its highest since early December hit on Friday. The euro jumped 0.4 percent to near 110 yen Monday, a four-month high. The dollar hit a nine-month high against the yen of 81.66 yen Monday.
MSCI's broadest index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> was down 0.1 percent.
Japan's Nikkei average <.N225> opened up 0.8 percent, boosted by the yen's weakness. <.T>
Reuters oil poll: http://link.reuters.com/bar76s
GREECE LAUNCHES DEBT SWAP
Greece undertook scheduled steps after securing a much-needed bailout fund, formally launching the bond swap offer to private holders of its bonds Friday, setting in motion the largest-ever sovereign debt restructuring in the hope of getting its finances back on track.
Greece has set a March 8 deadline for investors to participate in its unprecedented bond swap, according to a document outlining the offer.
This week's focus in gauging whether the relative calm in the markets will last is the European Central Bank's second refinacing operation set for Wednesday. The ECB's aggressive injection of funds into the system has removed concerns about a liquidity crunch in Europe and pushed down yields on lower-rated euro zone sovereign debts.
Interpreting the outcome will be difficult, though, as a high number could be seen as good in the sense that banks may be raising cheap money to lend, or bad in the sense that they are dependent on the ECB for funding, said Shane Oliver Head of Investment Strategy at AMP Capital Investors.
Regardless of the outcome, the very existence of cheap ECB funds for 3 years has substantially reduced the risks around the European banking system, he said.
The spike in oil prices, driven by heightening tension between Iran and the West, has raised concerns about damage to the fragile global economy.
A day after hitting a record high in euro terms, Brent crude jumped $1.85 a barrel to settle at $125.47 on Friday, its fifth day of gains. U.S. crude futures were down 0.2 percent to $109.59 a barrel Monday, after rallying nearly 2 percent Friday to settle at $109.77 a barrel, the highest settlement since May 3.
The cautious return to risk helped improve sentiment in Asian credit markets, tightening the spreads on the iTraxx Asia ex-Japan investment-grade index by 3 basis points early Monday.
(Additional reporting by Ian Chua in Sydney; Editing by Richard Pullin)