Wall Street Journal
February 27, 2012
The outcome on Wednesday of the European Central Bank's discount loan program for banks will likely determine whether the euro can build on last week's gains.
The common currency hit a three-month high against the dollar Friday, trading at $1.3487 after Greece's approval of a debt-bolstering bond swap and successful Italian bond auctions.
The ECB's first so-called long-term refinancing operation in December, where banks borrowed €489 billion in three-year loans at low interest rates, is widely credited with stabilizing financial markets. That bought time for Greece and its creditors to agree on a plan to restructure the country's debt, which boosted the euro last week.
Estimates of how much money euro-zone banks will borrow from the central bank this time range from €200 billion to up to €1 trillion. If loans total at least €400 billion, it would boost confidence in the Continent's banks and be positive for the euro, analysts say.
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