The yen climbed to a seven-month high against the dollar and the Swiss franc rose against most major peers as slower Chinese manufacturing and a rise in U.S. jobless claims fanned concern the economic recovery is faltering. The yen extended gains as data showed U.S. manufacturing grew in June at a slower pace. The euro touched the highest level in more than a week after the European Central Bank said it will lend 111.2 billion euros ($136.5 billion) for six days and a Spanish bond auction reached its maximum sale target. The franc reached a record high versus the euro, appreciating to less than 1.31. “The overall theme is risk aversion, and the yen and Swiss franc are probably your best indicators of that,” said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. “The euro is becoming a bit detached from the risk jitters. There was certainly a positive reaction to the Spanish bond auction and the incoming news about the ECB tenders.” The franc strengthened as much as 0.8 percent to a record 1.3074 per euro before trading at 1.3203 at 10:12 a.m. in New York. The yen appreciated 1.3 percent to 87.33 per dollar, from 88.43 yesterday, after earlier touching 87.14, its strongest level since Dec. 2. The euro advanced 1.6 percent to $1.2431, touching $1.2451, its highest level since June 21, and rose 0.4 percent to 108.61 yen. The Institute for Supply Management’s gauge of manufacturing fell to 56.2 in June from 59.7 a month earlier, the Tempe, Arizona-based group said today. A reading greater than 50 points to expansion. Economists forecast the measure would fall to 59, according to the median of 81 projections in a Bloomberg News survey. Euro Strengthens The euro strengthened against most of its 16 major counterparts even after Fitch Ratings said Europe’s sovereign debt problem boosts the risk of a renewed recession. Moody’s Investors Service yesterday placed Spain’s Aaa rating on review for a possible downgrade. Spain sold 3.5 billion euros of five-year bonds at an auction today, reaching the maximum sale target even as its borrowing costs rose after the Moody’s statement. The notes drew an average yield of 3.657 percent, compared with 3.532 percent at the previous sale on May 6. Demand was 1.7 times the amount sold, below the bid-to-cover ratio of 2.35 at the May sale. Moody’s yesterday cited “deteriorating” growth prospects and challenges in meeting fiscal targets as it said Spain’s Aaa classification may be lowered by as much as two grades, according to a statement by analysts including Senior Vice President Kristin Lindow in New York. ‘Brighter Day’ “The euro has had a brighter day,” Wells Fargo’s Serebriakov said. “It has been able to detach itself to an extent from those market jitters on the back of the Spanish debt auction, which the euro appears to have reacted positively to.” The ECB said 78 banks asked for six-day funds at the benchmark interest rate of 1 percent. Banks today need to repay 442 billion euros in 12-month loans, the biggest amount ever awarded. Banks asked for 131.9 billion euros in three-month loans yesterday, less than economists expected. Today’s allotment “is a reasonably big number,” said Laurent Bilke, an economist at Nomura International in London. “Together with yesterday’s operation, the funding needs come in on the high side of estimates. However, the banks that are overly reliant on the ECB are on the periphery of Europe, it’s not stress across the board.” U.S. Labor Department data today showed initial claims for U.S. unemployment benefits increased by 13,000 to 472,000 in the week ended June 26. Economists in a Bloomberg survey forecast a fall to 455,000. The number of people receiving unemployment insurance rose, while those getting emergency benefits dropped. Nonfarm Payrolls A report tomorrow by the department will show U.S. nonfarm payrolls fell by 125,000 in June, according to the median forecast of 81 economists in a separate Bloomberg survey. China’s Purchasing Managers’ Index showed manufacturing expanded less than forecast in June and Australian building approvals unexpectedly slid. “People are concerned that not many economies in the world are going to be sustainable after stimulus measures expire,” said Susumu Kato, chief economist in Tokyo at Credit Agricole CIB and CLSA, a unit of France’s largest bank by branches. “The bias is for the yen to be bought.” The yen typically strengthens in times of financial turmoil as Japan’s trade surplus means the nation does not have to rely on overseas lenders. The dollar benefits as the world’s main reserve currency. To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Keith Jenkins in London at Kjenkins3@bloomberg.net

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