The euro strengthened against the yen after a report showed Australia’s economy unexpectedly grew last quarter, boosting demand for higher-yielding currencies. Europe’s 16-nation currency advanced for a third day against the yen and Australia’s dollar climbed as the report added to evidence the worst of the global recession is over. The Dollar Index traded close to the lowest this year on concern the greenback will lose its role as the world’s reserve currency. “Risk appetite is improving in the market, which has been attracting cash away from safe-haven currencies like the dollar,” said Kyohei Morita, chief economist at Barclays Capital in Tokyo. Investors are “searching for higher yields.” The euro rose to 137.23 yen as of 6:56 a.m. in London, from 136.97 yesterday in New York. The European currency traded at $1.4304 from $1.4303. Japan’s currency was at 95.95 versus the dollar from 95.76. The Australian currency gained 0.6 percent to 82.58 U.S. cents and rose 0.8 percent to 78.85 yen. It earlier reached 82.54 U.S. cents, the strongest level since Sept. 29. The Dollar Index, used by the ICE to track the greenback against the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, traded at 78.394 from 78.404 yesterday, when it fell to 77.334, the lowest since Dec. 18. Australia’s dollar extended its record three-month advance after the Bureau of Statistics report showed the economy grew 0.4 percent in the three months ended March 31, following a revised 0.6 percent contraction in the previous three months. “This will probably reinforce Aussie outperformance,” said Sue Trinh, senior currency strategist at RBC Capital Markets in Sydney. “Against the U.S. dollar, we still see a risk that the Australian currency hits 85 cents before we see any signs of peaking.”

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