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Dollar Set for Weekly Gain on Signs Global Growth Slowing

The dollar headed for its first advance in three weeks versus the euro after a report showed German business confidence dropped to the lowest in more than two years, fueling demand for the safety of the U.S. currency.

The yen weakened against most of its 16 major peers as Japanese lawmakers in the lower house prepared to vote on a bill to double sales tax. Higher-yielding currencies rebounded against the dollar as equities advanced, led by financial shares even as Moody’s Investor Service downgraded 15 global banks. Canada’s dollar gained as stocks rose.

“You don’t have European flashpoints right now, but we knew beforehand global growth was suffering and I think that expecting any quick reversal is not in the cards,” said Andrew Wilkinson, chief economic strategist at Miller Tabak in New York. “Financials are rebounding quite strongly, so the market may be set for a reprieve today, but it should be no surprise the world is in the shape that it’s in, given the massive cloud over the euro zone.”

The dollar traded at $1.2551 per euro at 9:05 a.m. New York time, from $1.2540 yesterday. It has added 0.7 percent this week. The U.S. currency was at 80.36 yen, after appreciating to 80.52, the strongest level since May 16. It has gained 2.1 percent this week, the most since Feb. 24. The yen lost 0.2 percent to 100.85 per euro.

Market Forces

Futures on the Standard & Poor’s 500 rose 0.5 percent and the Standard & Poor’s GSCI Index of 24 raw materials increased 0.4 percent.

The business climate index for Germany, based on the Ifo institute’s survey of 7,000 executives, slid to 105.3 from 106.9 in May. Economists predicted a decline to 105.6, according to the median estimate in a Bloomberg News survey.

Data yesterday showed euro-area manufacturing shrank at the fastest pace in three years, and a gauge of Chinese industrial output indicated contraction. More Americans than forecast filed claims for jobless benefits, manufacturing in the Philadelphia region shrank and sales of existing homes fell, reports showed.

Canada’s dollar added 0.2 percent to C$1.0279 after touching C$1.0300, its lowest in a week.

Dollar Measure

The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, little changed at 82.294, after touching 82.465, the strongest level since June 13.

The dollar climbed above 80 yen yesterday for the first time in a month. Prime Minister Yoshihiko Noda’s Democratic Party struggled to overcome internal resistance to his bill to double Japan’s consumption tax before a lower-house vote that may come as soon as today.

The dollar’s rise versus the yen may stall, according to data compiled by Bloomberg. The greenback faces so-called resistance at the 100-day moving average of 80.41 yen, and may find support at 79.84, the 50-day moving average, the data show.

German Chancellor Angela Merkel, French President Francois Hollande, Italian Prime Minister Mario Monti and Spanish leader Mariano Rajoy will gather in Rome today. The International Monetary Fund said nations must make a “strong commitment” to the euro to stop a plunge in investor confidence.

Europe’s Leaders

They are due to join other European leaders in Brussels on June 28-29, the 19th summit since Greece’s financial meltdown rattled the euro. The gathering will try to resolve competing visions over how to reshape the 17-nation economy, with Germany and its fiscally disciplined neighbors unwilling to place additional burdens on their taxpayers.

The euro is down from this year’s high of $1.3487 on Feb. 24 and has depreciated about 6.6 percent in the past 12 months, according to Bloomberg Correlation-Weighted Indexes that measure 10 developed-market currencies.

Trading in the euro “will become more volatile as we approach the EU summit,” said Geoff Kendrick, the head of European currency strategy at Nomura International Plc in London. “There needs to be some positive outcome from the summit and there are big risks around it.”

Moody’s Investors Service lowered credit ratings on 15 banks yesterday. Credit Suisse Group AG’s ranking was reduced by three levels and Morgan Stanley’s by two steps. The rating changes reflect the lenders’ “significant exposure to the volatility and risk of outsized losses inherent to capital- markets activities,” Moody’s Global Banking Managing Director Greg Bauer said in a statement.

To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net Keith Jenkins in London at kjenkins3@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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