Euro Gains Most Since September as Traders Exit Bets on Decline

The euro rose the most in eight months against the dollar amid speculation traders who bet on its decline amid Europe’s sovereign-debt crisis had to buy back the currency as it strengthened to a one-week high.

Europe’s common currency fell on May 19 to its weakest level in four years a day after Germany banned naked short sales, adding to concern that the region’s leadership may not be able to contain the crisis. The yen gained against all of its 16 major counterparts as the MSCI World Index of shares traded near the lowest since August and the Reuters/Jefferies CRB Index of 19 raw materials fell for a fourth straight week. The greenback fell versus the yen ahead of a report next week that may show U.S. durable goods orders rose in April.

“There’s been a massive short covering,” said Andrew Busch, a global currency strategist at Bank of Montreal in Chicago. “The euro was already stabilizing this week when Germany came in and changed the rules of the game in the middle of the day by banning short sales and created additional uncertainty. The much stronger euro at the end of the week shows you how short people were. A tremendous amount of risk has been taken off the table.”

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