The dollar and the yen rose from one-week lows against the euro as a report showed U.S. consumer confidence unexpectedly fell this month to a record, increasing the haven demand for the currencies. The pound rose against all of its major counterparts as concern eased that the bailout of U.K. banks may widen the government’s deficit. Canada’s dollar weakened against the greenback as commodities dropped and Finance Minister Jim Flaherty prepared to deliver to Parliament his package of fiscal measures for economic revival. “We definitely have the risk-aversion-equals-a-stronger- dollar theme back,” said Dustin Reid, director of currency strategy at RBS Global Banking & Markets in Chicago. “There’s demand for dollars and dollar-denominated assets.” The dollar gained 0.2 percent to $1.3160 per euro at 11:04 a.m. in New York, from $1.3189 yesterday, after touching $1.3330, the weakest level since Jan. 19. The yen strengthened 0.5 percent to 116.95 per euro from 117.51 after reaching 119.45, also the weakest since Jan. 19. The yen advanced 0.3 percent to 88.88 per dollar from 89.10. The pound rose 1.4 percent to 92.97 pence per euro, after falling seven straight days, and increased as much as 1.8 percent to a one-week high of $1.4242. Barclays Plc said yesterday it retained 17 billion pounds ($23.9 billion) more in capital than required by regulators after writing down another 8 billion pounds of bad loans. U.K. Bank Bailout Sterling plunged to $1.3503 on Jan. 23, the lowest level since September 1985, after the government announced its second bank bailout in three months. The pound has slumped 29 percent versus the dollar since the end of June. The Canadian currency declined for the first time in five days, dropping 0.5 percent to C$1.2285 per U.S. dollar, as crude oil for March delivery fell 4.9 percent to $43.47 a barrel. The federal budget will include a stimulus package of more than C$30 billion ($24.5 billion) over two years as the country embarks on deficit spending for the first time in more than a decade, the Globe and Mail reported. The euro earlier gained versus the dollar and yen after the Ifo institute in Munich said its German business climate index, based on a survey of 7,000 executives, rose to 83 in January from 82.7 last month. The median forecast of 37 economists surveyed by Bloomberg News was for a decrease to 81. Euro Bears Investors paid the lowest premium since Jan. 12 to buy options granting the right to sell the euro against the dollar, signaling traders are less bearish on the European currency. The one-month 25-delta risk-reversal rate for the euro versus the dollar was as high as minus 0.02, compared with minus 0.32 yesterday. A negative reading indicates investors are willing to pay more to buy puts on the euro versus the dollar, or the right to sell, as opposed to calls, which give them the right to buy. The International Monetary Fund expects Germany’s economy, Europe’s largest, to contract 2.5 percent this year, fueling expectations the European Central Bank has room for more interest-rate cuts. “We expect the single currency to remain in a broad downtrend, in particular versus the dollar,” analysts led by Zurich-based Mansoor Mohi-Uddin at UBS AG, the second-largest currency trader last year, wrote in a research report yesterday. “We expect price pressures to keep on abating, and this will likely enable the ECB to ease rates further.” UBS recommends selling the euro with a target of $1.25 and an automatic buy order at $1.3450 to limit losses, according to the report. U.S. Confidence Falls The Conference Board’s index of consumer confidence fell to 37.7, from a revised 38.6 in December, the New York-based private research group said today. The median forecast of 70 economists surveyed by Bloomberg News was for an increase to 39. Records began in 1967. Federal Reserve policy makers will maintain the target lending rate in a range of zero to 0.25 percent at a two-day meeting ending tomorrow, according to a separate Bloomberg survey of analysts. The central bank may broaden the range of assets it will purchase to unclog credit markets.

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