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Euro Strengthens on Optimism for Greece Agreement

The euro rose against the majority of its 16 most-traded peers on speculation European finance ministers are close to finalizing a debt-reduction package for Greece.

The yen fell to a six-month low versus the euro after Japan’s exports decreased for a fifth straight month, undermining demand for the nation’s assets. Europe’s shared currency rose to the highest level in almost two weeks versus the greenback after falling earlier amid the ministers’ failure to complete the Greek deal yesterday in Brussels. Sweden’s krona advanced against all of its major peers.

“That European Union policy makers remain positive on the prospects for a deal may have contributed modestly to the improvements in the euro and risk appetite,” Brian Daingerfield, a currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford, Connecticut, said in a telephone interview.

The euro rose 0.1 percent to $1.2829 at 5 p.m. New York time after gaining to $1.2833, the most since Nov. 7. The yen declined 1 percent to 82.52 per dollar after reaching 82.55, the weakest since April 6. The yen hadn’t weakened beyond 82 per dollar since April. Japan’s currency dropped 1.1 percent to 105.86 per euro, after weakening to 105.89, the lowest level since May 3.

Krona, Rand

Sweden’s krona rose after a survey of Swedish industrial companies showed investments are expected to rise 9 percent this year, Statistics Sweden said today. The report damped concern over the economy amid reports of slumping exports and job cuts.

The currency advanced 0.7 percent to 6.7181 per dollar after touching 6.7172, its strongest level since Nov. 9. The krona appreciated 0.6 percent to 8.6190 per euro.

The South African rand fell versus all of its major peers to its weakest level in more than three years as inflation accelerated 5.6 percent in October from 5.5 percent a month earlier. The median estimate in a Bloomberg survey of 23 economists was 5.4 percent.

South Africa’s currency slipped 1.2 percent to 8.9482 per dollar after decreasing to 9.0092, its lowest level since April 2009. The rand depreciated 1.3 percent to 11.4850 per euro.

The Brazilian real fell to a three-year low after President Dilma Rousseff told Valor Economico that the currency is “overvalued,” spurring speculation that the government will allow it to depreciate further.

Brazil’s currency slid 0.9 percent to 2.0985 per dollar, the lowest on a closing basis since May 2009.

Meeting Scheduled

Europe’s shared currency earlier erased losses against the greenback after finance ministers said a further meeting on Greece had been arranged for Nov. 26 and that only “technical problems” are holding up a deal.

“We have a series of options on the table on how to close the financing gap,” German Finance Minister Wolfgang Schaeuble told reporters in Brussels. “We discussed the issue very intensively, but since the questions are so complicated we didn’t come to a final agreement.”

German Chancellor Angela Merkel told lawmakers that there’s a chance for a deal on Greek aid at next week’s meeting.

Schaeuble said the issue of the nation’s funding gap was solvable and possible solutions include reducing interest payments on its initial bailout loans, suspending payouts through 2020 on its second rescue package, or having the European Central Bank buy 9 billion euros ($11.5 billion) of the country’s Treasury bills, according to four people who attended the briefing.

‘Yen Weakness’

The Japanese currency slid for a sixth day versus the greenback after the Ministry of Finance said exports fell 6.5 percent in October from a year earlier, leaving a trade deficit of 549 billion yen ($6.7 billion). The median estimate of economists surveyed by Bloomberg News was for a shortfall of 360 billion yen.

“The yen got an extra push because of the trade-balance figures,” Eric Viloria, senior currency strategist for Gain Capital Group LLC in New York, said in a telephone interview. “It showed a deficit that was larger than expected, which is putting pressure on the yen because Japan is an export-driven economy.”

The 14-day relative strength index for the dollar against the yen was above 70 for a fourth day today, the level that some traders see as a sign an asset is about to change direction.

The yen has fallen against all but one of its major peers this month as Shinzo Abe, leader of the Liberal Democratic Party and favorite to topple Japan’s prime minister in Dec. 16 elections, advocated more aggressive measures to weaken it.

Worst Performer

Abe’s outlook “means they’re likely to be very, very aggressive in terms of not just an asset-purchase program, but likely for going after yen-weakening policies,” Camilla Sutton, head of currency strategy at Bank of Nova Scotia (BNS) in Toronto, said in an interview on Bloomberg Television’s “Lunch Money” with Sara Eisen. “If Japan implicitly goes after a weak yen policy on various fronts, it brings into question how the U.S. will react to that.”

Japan’s currency dropped 8.2 percent in the past 12 months, the worst performer of the 10 currencies tracked by Bloomberg Correlation-Weighted indexes. The euro is the second-worst performer, declining 6.4 percent, while the dollar fell 0.9 percent.

The Dollar Index rose earlier today after Federal Reserve Chairman Ben S. Bernanke said yesterday the U.S. risked falling back into recession unless lawmakers averted the so-called fiscal cliff, spurring demand for the safety of the U.S. currency.

Fiscal Cliff

An agreement on ways to reduce long-term federal budget deficits could remove an impediment to growth, while failure to avoid the fiscal cliff -- $607 billion in automatic tax increases and spending cuts scheduled to take effect at the beginning of 2013 unless Congress acts -- would pose a “substantial threat” to the recovery, Bernanke said in a speech in New York.

The gauge, which is used to track the greenback versus the currencies of six U.S. trading partners, was little changed at 80.917 after touching 81.265, almost the most since Sept. 5.

To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net

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

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