June 29 (Bloomberg) -- The dollar rose against the yen after China ruled out any “sudden changes” to its foreign- reserves policy. European stocks climbed, rebounding from their first back-to-back weekly declines since March.

The dollar gained as much as 0.4 percent versus the yen as of 1:10 p.m. in London, and 0.5 percent against the euro. The Dow Jones Stoxx 600 Index of European shares climbed 1.3 percent. Deutsche Telekom AG advanced on speculation that Vodafone Group Plc will bid for the German company’s U.K. mobile telephone unit.

China’s currency policy remains “quite stable,” central bank Governor Zhou Xiaochuan told reporters yesterday, easing concern that emerging-market nations may abandon the dollar. The U.S. currency will strengthen as much as 17 percent in the second half of the year as North America recovers from recession faster than Europe, according to this year’s most accurate foreign-exchange forecasters.

“People are nervous about what China could do, but there is still no alternative to the dollar,” said Stuart Thomson, a currency and fixed-income manager who helps oversee about $107 billion at Ignis Asset Management in Glasgow, Scotland. “It takes decades to lose reserve-currency status.”

Copper for three-month delivery on the London Metal Exchange gained 1.2 percent to $5,095 a metric ton. LME inventories fell for a 37th day, the longest decline since April 2004, fueling expectations that industrial demand is picking up. Crude oil rose as much as 1.3 percent to $70.06 a barrel in New York trading after Nigerian militants closed a field operated by Royal Dutch Shell Plc, further cutting production from Africa’s largest producer.

Stocks Gain

Russia’s Micex Index rallied 2.1 percent after UniCredit SpA said the nation’s shares may rise more than 30 percent in the coming year. The MSCI Emerging Markets Index, a benchmark for equities in 22 developing nations, advanced 0.4 percent for its fourth consecutive gain.

European stocks rebounded after concern that a global economic recovery will falter sent the Stoxx 600 4.6 percent lower in the past two weeks. The index retreated after a three- month, 36 percent rally drove valuations to 25.4 times earnings on June 12, the highest level since 2004 according to weekly data compiled by Bloomberg.

Bonn-based Deutsche Telekom, Europe’s biggest telephone company, rose 2.3 percent. Vodafone, the world’s largest mobile- phone company, is considering a bid for Deutsche Telekom’s T- Mobile division, a person familiar with the situation said. Newbury, England-based Vodafone increased 0.6 percent.

BRICs and Dollar

Novo Nordisk A/S, the world’s largest insulin maker, added 6.3 percent, rebounding from last week’s 5.3 percent drop. The European Association for the Study of Diabetes said its research into the cancer risks of a Sanofi-Aventis SA diabetes drug didn’t include Denmark-based Novo Nordisk’s competing product, Levemir.

Brazil, Russia, India and China agreed at a summit in Russia on June 16 to demand a bigger say in the running of global financial institutions. China, which has almost $2 trillion of foreign-exchange reserves, and Russia called for the creation of alternatives to the U.S. dollar as a reserve currency.

The dollar gained versus all 16 major currencies earlier today after Guan Tao, deputy head of the international payment department at China’s State Administration of Foreign Exchange, wrote in Chinamoney Magazine that the dollar will likely retain its status.

“Our foreign-exchange reserve policy is always quite stable,” Zhou told reporters yesterday at a central bankers’ meeting in Basel, Switzerland. “There are not any sudden changes.”

U.S. Futures

Futures on the Standard & Poor’s 500 Index advanced 0.5 percent, indicating the benchmark gauge for U.S. equities may rebound from its first back-to-back weekly declines since March. An index measuring the cost of using options as insurance against falls in stocks has dropped to the lowest level since the final trading session before New York-based Lehman Brothers Holdings Inc. filed for the biggest bankruptcy in U.S. history.

The VIX, as the Chicago Board Options Exchange Volatility Index is known, has dropped to 25.93 from a record 80.86 in November. That’s still above the 20.18 average during its 19- year history.

“Less volatile markets of late seem to have eased concerns about big stock swings,” said Abhinandan Deb, an equity derivatives analyst at Barclays Capital in London. “While I expect volatility to find a support ahead of earnings season, I don’t believe it is likely to explode either.”

U.K. gilts led gains in government bonds, with the yield on the benchmark 10-year note dropping 6 basis points to 3.63 percent, the lowest level in six weeks, before the Bank of England buys 3.5 billion pounds of securities as part of its asset-purchase plan to revive the economy. European government bonds also advanced, with the yield on the 10-year German bund declining 2 basis points to 3.37 percent.

To contact the reporter on this story: Justin Carrigan in London at jcarrigan@bloomberg.net

Last Updated: June 29, 2009 08:23 EDT