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Euro Is Set for Weekly Gain Before Data on Prices, Consumers

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Nov. 19 (Bloomberg) -- The euro headed for a weekly gain against the yen before reports that economists said will show German prices and consumer confidence rose.

Europe’s currency held onto yesterday’s gain versus the dollar on optimism a bailout for Ireland will prevent contagion across the region’s larger debt markets. The yen pared its weekly loss against major counter parts on speculation China will take further steps to cool its economy.

“Ireland, Portugal and other nations will be OK because macro data in Europe are not that bad,” said Junichi Makino, a Tokyo-based senior economist at Daiwa Institute of Research Ltd. “The euro will be supported as long as the region’s economy is resilient and exports advance.”

The euro was at 113.68 yen as of 12:50 p.m. in Tokyo from 113.95 yen in New York yesterday, having risen 0.6 percent this week. It earlier touched 114.13 yen, the highest since Nov. 8. The shared currency was at $1.3624 from $1.3643, after rising 0.8 percent yesterday.

The dollar was at 83.44 yen from 83.52 yen, after touching 83.79 yen yesterday, its strongest level since Oct. 5. The U.S. currency has advanced 1.1 percent against the yen this week.

Prices, Confidence

German producer prices gained 4.1 percent in October from a year ago after rising 3.9 percent in September, according to a Bloomberg News survey of economists before today’s data. The nation’s consumer confidence may advance to 5 in December from 4.9 this month, another survey showed before GfK AG, a market research company, releases the data on Nov. 23.

Ireland’s central-bank governor, Patrick Honohan, said he expects his nation will seek a package worth “tens of billions” of euros to help rescue Irish banks battered by the country’s property slump. Officials of the European Union, International Monetary Fund and European Central Bank yesterday started to study the banks’ books.

“Progress towards a possible loan package for Ireland from the EU and IMF is helping to buoy market sentiment,” said Khoon Goh, market economics and strategy head at ANZ National Bank Ltd. in Wellington. “This is likely to be positive for the euro.”

Spain sold 3.65 billion euros ($4.98 billion) of bonds at an auction yesterday at lower yields than similar traded securities.

China’s Tightening

The euro has gained 1.7 percent over the past three months in a measure of 10 developed-nation counterparts, Bloomberg Correlation-Weighted Currency Indexes show. The dollar is down 4.9 percent, while the yen has dropped 2.4 percent.

The yen rebounded on speculation China will raise interest rates to curb accelerating inflation, boosting demand for safer assets. China Securities Journal reported today inflation in China may reach 3.8 percent in the fourth quarter, citing estimates by the State Information Center.

“There’s talk that China’s central bank may hike rates as soon as today, which seems to be weighing on risk appetite,” said Takashi Kudo, general manager of market information service at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. in Tokyo. “This would probably be positive for safe-haven currencies such as the yen and the dollar.”

The dollar headed for a third weekly gain versus the yen as the U.S. economy grew at a 2.4 percent annual rate in the third quarter, compared with a 2 percent increase initially reported, according to economists surveyed by Bloomberg before the data due on Nov. 23. Treasury 10-year yields have risen eight basis points, or 0.08 percentage point, to 2.866 percent this week.

“The surprising backup in U.S. yields is putting yen under pressure,” Calvin Tse, a currency strategist in London at Morgan Stanley, wrote in a research note yesterday. “Dollar-yen has a very robust correlation with U.S. rates.”

Bernanke, Dollar

Federal Reserve Chairman Ben S. Bernanke took his defense of the U.S. central bank’s monetary stimulus abroad, saying it will aid the world economy, and implicitly criticized China for keeping its currency weak.

The best way to underpin the dollar and support the global recovery “is through policies that lead to a resumption of robust growth in a context of price stability in the United States,” Bernanke said in prepared remarks to a conference later today in Frankfurt. Countries that undervalue their currencies may eventually inhibit growth around the world and risk financial instability at home, he said.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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