By Ben Levisohn March 16 (Bloomberg) -- The euro gained against most major currencies after European finance ministers worked out a strategy for emergency loans to Greece should the nation’s plan to reduce the region’s biggest budget deficit fail. The common currency advanced as a report also showed that German investor confidence fell less than forecast in March. The Swiss franc rose to its highest level versus the euro since October 2008 on speculation the central bank’s resistance to the currency’s strength is waning. The yen was mixed as gains in global stocks dented demand for the currency as a haven. “The dynamics are supportive of the euro,” said Camilla Sutton, a Bank of Nova Scotia currency strategist in Toronto. “The data was supportive and there’s progress on the European Union front. Everything is coming together to support risk sentiment.” The euro strengthened 0.1 percent to 123.98 yen at 10:12 a.m. in New York, from 123.83 yesterday. The dollar declined 0.4 percent to $1.3729 per euro, from $1.3677. The yen rose 0.3 percent to 90.29 per dollar, from 90.53. Officials from the 16 countries using the euro, meeting yesterday, worked out a strategy of emergency loans for Greece. Prime Minister George Papandreou’s government is struggling to narrow a budget deficit that is more than four times the European Union’s 3 percent limit. Aid to Greece would probably come through governments pooling funds to extend direct loans, said a European official who asked not to be named. The meeting didn’t resolve the size of future loans, which countries would offer them or how long they would last and cost. Confidence Index While ZEW’s confidence index dropped for a sixth month amid signs Germany’s economy is struggling to expand as Greece’s fiscal woes shake financial markets, it beat analyst estimates. The index slipped to 44.5 in March, from 45.1 in February. The median of 41 forecasts in a Bloomberg News survey was 43.5. The ZEW data were “slightly better than anticipated,” said Stuart Bennett, senior foreign-exchange strategist at Credit Agricole Corporate and Investment Bank in London. “It’s a bit of a knee-jerk reaction, and has established a new high for the day. We would caution about being too short the euro.” The franc advanced as much as 0.1 percent to 1.4507 per euro, extending yesterday’s biggest two-day gain this year. The Swiss National Bank started selling francs a year ago to contain declines in consumer prices and safeguard exports, intervening at about 1.4578 per euro, according to UniCredit SpA. Swiss Franc “The SNB’s inaction on euro-franc was surprising,” a UniCredit SpA team including Milan-based currency strategist Roberto Mialich wrote in a report today. “The bank’s reply is critical to prevent investors from a quick test of 2008 lows below 1.44.” The franc was at 1.4514 per euro, from 1.4524 yesterday, when it capped a 0.6 percent advance, the most in a year. The Swiss currency rose to 1.0574 per dollar, from 1.0619. The dollar fell versus most currencies as stocks rose before a meeting of the Federal Reserve at which policy makers are likely to hold the target interest rate at a record low to keep the economic recovery on track. The MSCI World Index advanced 0.6 percent. “We don’t anticipate the first rate hike from the Fed until the end of this year at the earliest, perhaps even next year” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. Fed Meeting The Fed will announce its interest-rate decision today, with all 90 economists surveyed by Bloomberg News forecasting policy makers will keep the benchmark interest rate in a range of zero to 0.25 percent. Since March 2009, the Fed has said “exceptionally low” rates are likely warranted for “an extended period.” Kansas City Fed President Thomas Hoenig voted against repeating the statement on Jan. 27 because he wanted to keep “the broadest options possible.” Since then, Dallas Fed President Richard Fisher, James Bullard of St. Louis and the Philadelphia Fed’s Charles Plosser have also expressed reservations. The Fed’s “‘extended period’ language will be more vigorously debated, which could be dollar supportive and be seen as a step closer to them actually changing the language,” said Michael Katz, a currency strategist at Forecast Ltd. in Sydney. “Once they actually change the language we can probably start expecting rate hikes in about four to six months.” The Australian dollar fell against the yen and New Zealand’s currency after minutes of the central bank’s March meeting signaled the pace of further interest-rate increase may be gradual. The Aussie dropped 0.3 percent to 82.58 yen from 82.80 yen and to 1.2931 against the kiwi. ---With assistance from Keith Jenkins in London and Ron Harui in Singapore. Editors: Dave Liedtka, James Holloway To contact the reporters on this story: Ben Levisohn in New York at blevisohn@bloomberg.net; Keith Jenkins in London at Kjenkins3@bloomberg.net

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