By Candice Zachariahs June 10 (Bloomberg) -- The euro gained against the dollar and yen as economic data showing growth in the Asia-Pacific region boosted demand for higher-yielding currencies. The kiwi and Aussie dollars climbed as New Zealand central bank Governor Alan Bollard raised the key interest rate from a record low and Australia’s jobless rate fell. South Korea’s won slumped to a two-week low after the government said it will act to curb volatility in capital flows. The euro extended gains after Reuters reported that the head of China’s pension fund said the shared currency will survive Europe’s debt crisis. “The numbers generally have been fairly robust into the second quarter, and the real uncertainty is what happens in the second half of the year,” said Mitul Kotecha, head of global currency strategy in Hong Kong at Credit Agricole CIB. Improved risk appetite “may be benefitting the euro but the impact is fairly limited and euro-dollar will struggle over $1.20.” The euro climbed to $1.2049 as of 6:45 a.m. in London from $1.1979 in New York yesterday. It touched $1.1877 on June 7, the weakest since 2006. The currency rose 0.5 percent to 109.89 yen. It reached 108.08 yen on June 7, the least since November 2001. The dollar was at 91.21 yen from 91.30. Asian stocks advanced for the second day this week as government data showed China’s exports jumped 48.5 percent in May from a year earlier, the biggest gain in more than six years. Japan said its economy expanded more than initially estimated in the first quarter, driven by exports and an upward revision to consumer spending. The MSCI Asia Pacific Index and Japan’s Nikkei 225 Stock Average both advanced 0.8 percent. Jobs, Rates Dai Xianglong, chairman of the National Council for Social Security Fund, said the euro will survive Europe’s crisis and that his nation faces the risk of losses on currency reserves because of growing debt in the U.S., according to Reuters. The market is hesitant to add to bearish positions on the euro on speculation stocks will rally, said Toshiya Yamauchi, a senior foreign-exchange analyst at the online currency-trading company Ueda Harlow Ltd. in Tokyo. “Investors may be using the news out of China to buy back the euro,” Yamauchi said. “The currency can rebound further if stop-loss orders kick in.” Gains in the single currency may be limited with the European Central Bank forecast by economists to keep rates unchanged today. Central bank President Jean-Claude Trichet is under pressure to explain how far he’s prepared to wade into government bond markets after the bank announced May 10 a program to purchase the debt of some nations to restore “normal functioning” of markets. Policy makers said they will counter the effects on money supply by draining reserves equal to the amount bought, so- called sterilization. ‘Policy Mishaps’ The market will be “looking for any indications as to what their intentions are with their bond-buying sterilization and liquidity management,” said John Horner, a currency strategist in Sydney at Deutsche Bank AG. “The stresses in Europe aren’t going away any time soon.” The euro will fall toward $1.15 longer-term, Horner said, echoing a call by Goldman Sachs Group Inc., which reversed a forecast for the euro to rise. “European politics remained a major source of uncertainty,” analysts including Thomas Stolper at Goldman Sachs in London wrote in the note to clients. “The likelihood of continued policy mishaps remains very high in the near term and as a result the euro will likely remain under pressure.” The shared currency will probably trade at $1.15 in three and six months and at $1.25 in 12 months, down from $1.35 previously at all three forecast horizons, Goldman Sachs said. Jobs, Rates The Aussie dollar rose as the nation’s employers added 26,900 workers in May, according to a statistics bureau report. The median estimate of economists surveyed by Bloomberg News was for an increase of 20,000. The jobless rate fell to 5.2 percent. New Zealand’s dollar advanced against all 16 of its most- traded counterparts after Governor Bollard raised the benchmark interest rate to 2.75 percent and said “underlying inflationary pressures are expected to increase.” “We’re embarking on a process where rates will be gradually increased back toward neutral,” said Mike Jones, a Wellington-based currency strategist at Bank of New Zealand Ltd. “We’re going to see support for the currency from a widening yield advantage in New Zealand and that will help offset some of the effects from lower risk appetite in a global sense.” The so-called kiwi rose 1.5 percent to 67.73 U.S. cents and gained 1.5 percent to 61.80 yen. Australia’s currency climbed 1.3 percent to 83.82 U.S. cents and 1.2 percent to 76.48 yen. South Korea’s won fell to as low as 1,271.45 per dollar, the weakest level since May 25, after Finance Minister Yim Jong Yong yesterday said the government will announce steps to rein in currency-market volatility while respecting the principles of an open capital market. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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