Exchange traded funds that follow the euro’s movements against the U.S. dollar were set to rise Wednesday following reports that Europe’s bailout fund may be increased.

CurrencyShares Euro Trust (NYSEArca: FXE) gained 0.5% in premarket trading. The fund rallied sharply late Tuesday after The Guardian reported France and Germany are close to a deal to boost the Eurozone rescue fund before a key EU summit. The agreement could boost the European Financial Stability Facility to 2 trillion euros, according to the report.

The euro ETF shook off a downgrade of Spain’s credit rating by Moody’s.

Traders have been closely watching the euro because it appears to be driving the risk trade in markets. For example, the euro and the S&P 500 have shown a correlation of over 80% recently with the market moving on headlines on the European debt crisis. [ETF Correlations Still Elevated in Headline-Driven Market]

The euro ETF was up 3.2% year to date as of Oct. 18, according to Morningstar. The currency fund is trying to climb above its 50-day moving average.

CurrencyShares Euro Trust

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