Euro Strengthens Before This Week’s European Summit

The euro advanced, extending last week’s gains versus the dollar and yen, as Italy’s cabinet approved a plan to cut its deficit before a European summit on the region’s sovereign debt crisis.

The 17-nation currency appreciated against most of its 16 major counterparts after 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 ($269 billion) to fight the crisis. The yen and dollar weakened as European stocks gained, damping demand for safer investments. The Swiss franc fell for a fourth consecutive day against the euro.

“The euro is benefiting from a general bid for risk,” said Adam Cole, global head of foreign-exchange strategy at RBC Europe Ltd. in London. “The news from Italy helped with the positively received budget package and austerity measures. The euro feels slightly better bid today.”

The euro rose 0.4 percent to $1.3441 at 7:12 a.m. New York time after gaining 1.2 percent last week. The 17-nation currency climbed 0.4 percent to 104.88 yen. The dollar was little changed at 78.02 yen.

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