The dollar and the yen headed for their biggest monthly gains versus the euro since October as growing evidence of a global slowdown increased the appeal of the currencies as a refuge from the financial crisis. The euro declined for a second day versus Japan’s currency after reports showed inflation in the 16-nation region slowed to the least since 1999 and the jobless rate climbed to a two-year high. The Swiss franc rose to the highest level in more than a week against the euro after Swiss National Bank President Jean- Pierre Roth said yesterday he is yet to see the currency “overshooting.” “Safe-haven currencies remain the way forward and that’s benefiting the yen and the dollar,” said Jeremy Stretch, a senior currency strategist in London at Rabobank International. “The underlying data continues to be biased to the downside and investors are not buying into the recovery story, with stock markets remaining so fragile.” The dollar rose to $1.2851 per euro as of 10:12 a.m. in London, from $1.2954 in New York yesterday. It gained 8.7 percent this month, extending a 4.4 percent rally last year. The yen strengthened to 114.85 versus the euro, from 116.60 yesterday, following a 29 percent appreciation last year. The dollar fell to 89.39 yen from 90.03 yen. It is down 1.4 percent against the yen in January. The euro declined against 14 of the 16 most-active currencies tracked by Bloomberg this month. Billionaire investor George Soros said the currency may not “survive” unless the European Union pushes for a global plan to deal with toxic debt, Austria’s Der Standard newspaper reported yesterday. ‘Fall Apart’ Soros, who made $1 billion breaking the Bank of England’s defense of the pound in 1992, told reporters this week he exited bets against sterling after it dropped to $1.40. The pound strengthened to 89.97 pence per euro, from 90.55 yesterday, brining its gain in January to 6.4 percent, the most since the euro’s debut in 1999. It was little changed at $1.4290, for a 2.1 percent loss this month. The pound “is showing signs of turning the corner,” Greg Gibbs, director of foreign-exchange strategy at ABN Amro Holding NV in Sydney, wrote in a note to clients. “However it still has considerable work to do to the shake off the bear trend.” Europe’s inflation rate dropped to 1.1 percent in January, the lowest since July 1999, and the unemployment rate rose to 8 percent in December, the highest in two years. The franc appreciated as much as 0.5 percent to 1.4826 per euro, the strongest since Jan. 21, before trading at 1.4867. ‘Painful’ Franc While the franc’s 10 percent advance against the euro in the past six months was “painful” for the country’s exporters, Roth said in a Bloomberg Television interview yesterday he saw no need to act. SNB Vice-President Philipp Hildebrand said last week policy makers are ready to sell an “unlimited” amount of francs to prevent it appreciating. The yen strengthened 2.1 percent to 57.51 versus the Australian dollar, from 58.71 yesterday. Japan’s current-account surplus makes the yen attractive to investors in times of financial turmoil because it makes the country less reliant on capital markets. “We like selling dollar-yen,” analysts led by Jim McCormick, London-based global head of foreign-exchange and local-markets strategy at Citigroup Inc., wrote in a research note yesterday. “Structural yen appreciation has yet to run its course as there remains scope for investors to unwind shorts.” A short position is a bet an asset will decline. Factory Output Japan’s factory output fell a record 9.6 percent in December from the previous month, the Trade Ministry said today in Tokyo. The jobless rate climbed to 4.4 percent and household spending slid 4.6 percent, separate reports showed. The Japanese currency will probably extend gains through the end of the country’s fiscal year on March 31 as exporters buy it to hedge revenue and money managers bring funds home amid the global slump, according to Barclays Capital. The yen also may advance as investors reduce so-called carry trades, where they borrow in the currency to invest in nations where interest rates exceed Japan’s 0.1 percent, said Toru Umemoto, chief currency strategist at Barclays. “We expect even further yen appreciation toward the Japanese fiscal year end in March, as both corporate hedging and investor repatriation flows support the currency,” Tokyo-based Umemoto said. “We believe the dollar will decline to 84 yen in three months.” Honda Motor Co., Japan’s second-largest automaker, slashed its full-year profit forecast 57 percent today as vehicle demand in the U.S. plunged and the yen gained against the dollar, eroding the value of exports. The Nikkei 225 Stock Average slid 3.1 percent today and the MSCI World Index lost 0.9 percent. GDP Report Demand for dollars may weaken on speculation a U.S. government report today will show the world’s biggest economy shrank at the fastest pace since 1982. “From a fundamental perspective, the GDP report would be negative for the dollar and market sentiment,” said Lee Wai Tuck, a currency strategist at Forecast Pte Ltd. in Singapore. U.S. gross domestic product contracted at a 5.5 percent annual rate from October through December, according to a Bloomberg survey before the Commerce Department reports the figure in Washington. The ICE’s Dollar Index, which tracks the greenback versus the euro, the yen, the pound, the Canadian dollar, the Swedish krona and the Swiss franc, rose 0.5 percent to 85.717, a third day of gains. It rose 6 percent this month, following a 6 percent advance last year.

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