The euro advanced to a six-month high against the dollar as Europe’s services and manufacturing growth slowed in September less than initially estimated. The 16-nation currency gained against most of its major counterparts on evidence that Europe’s economic recovery is sustainable. The yen erased a decline against the dollar that occurred after the Bank of Japan said it would step up asset purchases. The Aussie fell against the dollar after the central bank unexpectedly left borrowing costs unchanged. “The market is looking for any reason they can find to buy euros,” said Tim O’Sullivan, chief trader at FOREX.com, a unit of the online currency trading company Gain Capital in Bedminster, New Jersey. The euro gained 0.9 percent to $1.3801 at 9:12 a.m. in New York, from $1.3685 yesterday, after touching $1.3812, the highest level since March 17. The yen declined 0.7 percent to 114.89 per euro, from 114.08. Japan’s currency appreciated 0.1 percent to 83.26 per dollar, from 83.36. A composite index based on a survey of euro-area purchasing managers in the services and manufacturing industries fell to 54.1 in September from 56.2 in the previous month, London-based Markit Economics said today. It had initially reported a drop to 53.8. A reading above 50 indicates expansion. Europe’s currency gained versus the dollar even as Moody’s Investors Service said Ireland’s Aa2 rating will “most likely” be cut one notch if a downgrade goes ahead in the wake of the government’s 50 billion euro ($69 billion) pledge to save the country’s banks. The ratings company, which last lowered Ireland in July, will finish a review within three months. ‘Underlying Fundamentals’ “The euro seems to benefit from the perception that it’s one of the only hard currencies around, rather than reflecting any material improvement in underlying fundamentals for the euro zone,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. The common currency extended its gain as U.S. stock-index futures advanced. Futures on the Standard & Poor’s 500 Index expiring in December climbed 0.8 percent. Japan’s currency fell earlier today versus the dollar as the central bank said it will set up a 5 trillion yen ($60 billion) fund to buy government bonds and other assets, inflating the balance sheet at a time when U.S. and U.K. central bankers are contemplating similar moves. The bank cut the overnight call rate target to a range of zero to 0.1 percent, the lowest level since 2006, from 0.1 percent. Japan’s Intervention The yen also dropped earlier versus the dollar on prospects that Japan may act to weaken its currency again to protect the nation’s export-led recovery. “The Bank of Japan could intervene at any time,” said Joseph Capurso, a foreign-exchange strategist at Commonwealth Bank of Australia in Sydney. “The end of the meeting may be the catalyst for them to resume intervention.” Japan intervened to weaken the yen and help exporters last month for the first time since 2004, joining countries across Asia and Latin America that have tried to temper gains in their currencies. Brazil’s Finance Minister Guido Mantega warned Sept. 27 of a “currency war” and said his government will buy all “excess dollars” in the market to limit the real’s appreciation. Finance Minister Yoshihiko Noda told reporters in Tokyo today that he’s prepared to explain the reasons for intervention to his Group of Seven counterparts. The Aussie slid 0.5 percent to 96.39 U.S. cents as the Reserve Bank of Australia held the overnight cash rate target at 4.5 percent, as forecast by only 6 of 25 economists in a Bloomberg News survey. Australia’s Outlook Speculation has intensified in recent weeks that the RBA would boost borrowing costs before the end of the year, helping fuel an 8.6 percent surge in Australia’s currency last month and pushing it toward parity with its U.S. counterpart. South Korea’s won dropped for the first time in seven days after the government announced plans to audit banks’ foreign- exchange trading. The won slid 0.7 percent to 1,130.58 per dollar after reaching 1,122.30 yesterday, the strongest level since May 5. To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net; Keith Jenkins in London at kjenkins3@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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