The euro rallied to a four-month high against the dollar on Wednesday as investors cheered the decision from a German court to reject calls to block the ratification of the Eurozone's permanent rescue fund.

The single currency jumped to a high of $1.2937 before later trading at around $1.2893 from $1.2858 the previous session.

While the widely anticipated decision from Germany's Constitutional Court gives a green light to the €500bn European Stability Mechanism, the court did rule that Germany would not contribute more than €190bn to the rescue fund without consent from parliament.

The court decision had been widely expected but analysts said relief about the announcement spurred increased risk appetite.

The dollar index, which measures the US currency against a basket of six major currencies, fell to 79.729 from 79.865 on Tuesday on expectations for Fed easing.

Most investors expect the Fed to launch another programme of bond purchases, otherwise known as quantitative easing, which devalues the dollar. The central bank concludes its two-day meeting on Thursday.

Against the yen the dollar rose to ¥77.87 from ¥77.76 on Japan's finance minister warned the central bank would not allow continued strength in the Japanese currency after it rose to a 14-week high against the dollar on Tuesday.

The British pound advanced to $1.6105 from $1.6066 the previous session while the Australian dollar climbed to $1.0462 from $1.0433 on Tuesday.



CJ

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