The yen fell against all its major counterparts as radiation levels that can prove fatal were detected at a damaged nuclear power plant in Japan amid signs the global economic recovery is gaining momentum elsewhere. The euro erased losses against the dollar after European Central Bank President Jean-Claude Trichet said inflation rates that stick above 2 percent would be a concern. The dollar earlier advanced after Federal Reserve official James Bullard said the central bank may consider scaling back its monetary stimulus. Canada’s currency was the best performer against the dollar as crude oil traded near a two-week high amid concern renewed violence in Libya may further disrupt supplies. “Dollar-yen is all about what’s happening with this power plant right now,” said Greg Salvaggio, senior vice president of capital markets at currency-trading firm Tempus Consulting Inc. in Washington. “The claim numbers are pretty much set and insurance companies know what they’re going to have to pay so what’s happening now is there significantly growing concern on the Japanese government’s inability to contain this situation.” The yen weakened 0.5 percent to 81.73 per dollar at 11:06 a.m. in New York, from 81.34 March. The Japanese currency fell 0.6 percent to 115.26 per euro. The euro gained 0.1 percent to $1.4103 after falling as much as 0.5 percent. Franc Haven The Swiss franc, the best performing major currency in the past year, is the second-best performer against the dollar today, rising 0.4 percent to 91.60 centimes per dollar and 0.3 percent to 1.2919 per euro. “Given the nuclear situation right now, I think yen as a safe haven has disintegrated and Swiss franc as the global safe haven is a much more probable trade right now,” said Tempus’s Salvaggio. The franc has surged 8 percent in the past year, the most among the 10 most-widely traded currencies tracked by the Bloomberg Correlation-Weighted Indexes. “The economy is looking pretty good,” Bullard told reporters in Marseille, France March 26. “It is still reasonable to review QE2 in the coming meetings, especially this April meeting, and see if we want to decide to finish the program or to stop a little bit short,” he said, referring to the second round of so-called quantitative easing, due to end in June. Dollar Index The Dollar Index, which InterContinentalExchange Inc. uses to track the currency against six of its major trading partners, was little changes at 76.398. “If you take the Fed speak, coupled with positive data surprises, that could certainly support yields and in turn support the dollar against the yen or the euro,” said Mark McCormick, a New York-based currency strategist at Brown Brothers Harriman & Co. “It’s because of the relative shifts in two-year interest rates.” Yields on U.S. two-year notes rose as much as five basis points, or 0.05 percentage point, to 0.78 percent, the highest since March 4. Japanese two-year bonds were unchanged at 0.205 percent. Japanese stocks fell, with the Nikkei 225 Stock Average dropped 0.6 percent. Futures show traders are betting there is a 52.5 percent chance the Federal Reserve will raise U.S. interest rates from near zero at the January 2012 meeting, according to CME Group Inc. exchange futures. That compares with 41.1 percent a week ago. Economic Numbers Consumer spending in the U.S. rose more than forecast in February as incomes climbed, helping to bolster the expansion in the world’s largest economy. Purchases increased 0.7 percent, the most since October, after advancing 0.3 percent the prior month, Commerce Department figures showed today in Washington. The euro erased losses against the dollar as Trichet spoke about inflation in Paris today. “Our definition of price stability is below 2 percent, close to 2 percent,” Trichet said. “Differences must be a worry because they can become persistent.” Trichet, told the European Parliament March 21 he has “nothing to add” to his March 3 remarks when he said policy makers may raise the benchmark rate from a record low of 1 percent at their next meeting April 7. Markets reacted to Trichet’s “hawkish” comments, said Andrew Busch, a global currency strategist at Bank of Montreal in Chicago. “It caught the markets at a point where we’d been at the lows for the euro. You get people running the other way.” Canada’s currency rose against all its most traded counterparts as crude oil for May delivery advanced as much as 0.3 percent to $105.76 per barrel in New York. The loonie gained 0.5 percent to 97.52 cents per U.S. dollar from 98.05 cents on March 25. To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net; To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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