The Dollar Index headed for a fifth monthly drop before U.S. reports forecast to show consumer spending cooled and businesses grew at a slower pace, giving the Federal Reserve more reason to maintain stimulus. The euro was set for a fourth monthly gain versus the yen as the region’s inflation accelerated to the fastest pace in two and a half years, adding to signs the recovery is gaining momentum. European stocks headed for a weekly gain. China’s yuan strengthened beyond 6.5 per dollar for the first time since 1993 on speculation the central bank will allow quicker gains to tackle inflation. The Swiss franc advanced to a record versus the U.S. currency. “Rate expectations have risen in most countries with the exception of the U.S.,” said Adam Cole, global head of foreign- exchange strategy at Royal Bank of Canada in London. “Markets are also quite strongly in risk-seeking mode and that’s always a negative environment for the dollar.” The Dollar Index fell to 72.891 as of 12:44 p.m. in London from 73.121 in New York yesterday, when it dropped to 72.871, the lowest since July 2008. The gauge, which tracks the dollar against the currencies of six major U.S. trading partners, has fallen 3.9 percent this month. The euro traded at 120.82 yen from 120.83, headed for a 2.7 percent monthly gain. Against the dollar the common currency climbed for a ninth day to $1.4858, after rising to $1.4882 yesterday, the strongest level since December 2009. The dollar bought 81.33 yen. Japanese markets were shut today for a public holiday, and the U.K. is closed for the wedding of Prince William and Kate Middleton. Spending Slows U.S. consumer spending rose 0.5 percent in March after a 0.7 percent gain in February, a Bloomberg survey showed before today’s report. The Institute for Supply Management-Chicago Inc. will say its business barometer fell to 68.2 in April from 70.6 in March, according to a separate survey. The Commerce Department said yesterday economic growth slowed to a 1.8 percent annual rate last quarter from 3.1 percent in the prior three months. Futures on the Chicago Board of Trade show a 44 percent chance the Fed will raise its target lending rate at least a quarter percentage point by March. That compared with a 50 percent probability a week earlier. The euro headed for a second week of gains versus the dollar on speculation quicker growth in Europe will encourage the European Central Bank to keep raising interest rates. Euro Inflation Inflation in the 17-nation euro region quickened to 2.8 percent in April from 2.7 percent, the European Union’s statistics office in Luxembourg said today in an initial estimate. Europe’s seasonally adjusted jobless rate held at 9.9 percent in March, the lowest since January 2010. An index of executive and consumer sentiment slipped to 106.2 from 107.3 in March, the sharpest drop since May 2010, and unemployment held at 9.9 percent, separate reports showed. European Central Bank Governing Council member Yves Mersch said yesterday the central bank is committed to withdrawing non- standard policy measures “at an appropriate pace, in view of incoming news.” “Rate-increase expectations still persist,” said Norifumi Yoshida, vice president of the trading section in Singapore at Mizuho Corporate Bank Ltd., a unit of Japan’s second-largest banking group. “The trend is for euro appreciation.” China’s yuan gained for a third day on speculation the central bank will let its currency appreciate faster to curb accelerating inflation. Faster Appreciation Consumer prices in Asia’s biggest economy rose 5.4 percent in March from a year earlier, the most since July 2008, the government said on April 15. Prices may rise as much as 5.6 percent in May and June, the Xinhua News Agency reported yesterday, citing an unidentified Ministry of Finance official. “The central bank is tolerating faster currency appreciation to contain import costs,” said David Cohen, an economist at Action Economics in Singapore. The yuan rose 0.1 percent to 6.4910 per dollar after appreciating to 6.4892, the strongest since the country unified official and market exchange rates at the end of 1993. The pound rose 0.2 percent to $1.6658, headed for a monthly gain of 3.9 percent. It was little changed versus the euro at 89.20 pence. The Swiss franc appreciated against the dollar after central bank President Philipp Hildebrand said price stability could be threatened by higher commodity prices, a weakening franc and expansionary monetary policy. Switzerland’s leading economic indicator unexpectedly increased in April, signaling the economy is gaining momentum. ‘One-Two Punch’ The franc was 0.8 percent stronger at 86.64 centimes per dollar after reaching a record 86.53. “It was a one-two punch with the comments and data,” said Peter Rosenstreich, chief market analyst in Geneva at at Swissquote Bank SA. “First was Hildebrand’s bullish assessment of the Swiss economy and inflation expectations, plus his hawkish comment that if rates stayed low there would be longer term issues, which supports the view of a rate hike in June. Then the KOF number just reinforced the concept that the Swiss economy is running hot.” To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net. To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.

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