The euro rose against the dollar, approaching its strongest in 18 months, on speculation that European Central Bank President Jean-Claude Trichet will signal further rate increases after policy makers meet tomorrow. The 17-member common currency strengthened against all but one of its most actively traded peers as a report showed European services and manufacturing growth accelerated in April. The Dollar Index declined toward the lowest level since July 2008. New Zealand’s dollar dropped to a two-week low after a government report showed the nation had the biggest net outflow of residents in more than 10 years. The pound slumped to the weakest in more than a year against the euro. “The ECB has nailed its anti-inflation colors firmly to the mast and the Fed hasn’t even got around to starting yet,” said Steven Barrow, a currency strategist at Standard Bank Plc in London. “This euro rally won’t extend too far if the ECB isn’t as hawkish as the market expects.” The euro rose 0.3 percent to $1.4862 as of 10:15 a.m. in London. It climbed to $1.4902 on May 2, the most since December 2009. The single currency gained 0.3 percent versus the yen, to 120.38. The Japanese currency was little changed at 81.02 per dollar from 80.94 yesterday. The Dollar Index, which InterContinentalExchange Inc. uses to track the greenback against the currencies of six major trading partners, slipped 0.2 percent to 73.005. German-U.S. Yield Spread The yield on 10-year German bunds climbed above the U.S. equivalent yesterday for the first time since June 2009 as data showed producer-price inflation in the euro region unexpectedly accelerated to the fastest pace in 2 1/2 years in March, boosting the case for tighter monetary policy. A composite index of European services and manufacturing rose to 57.8, from 57.6 in March, led by factory output, indicating the economy is weathering higher oil prices. A separate report showed Spain’s registered unemployment declined for the first time this year. French Finance Minister Christine Lagarde said a strong euro benefits the region’s companies and signaled that inflation is a greater concern than growth in the region, saying there’s no need for further stimulus, and warning that consumer-price increases are accelerating “a little bit.” The Dollar Index slipped before the ADP Employer Services report, which is expected to show U.S. employment increased by 198,000 in April, after a 201,000 gain in March. Non-farm payrolls are published on April 6. Pound Weakens “If U.S. data are disappointing that might put some pressure on the greenback and give some support to euro- dollar,” said Lutz Karpowitz, a currency strategist at Commerzbank AG in Frankfurt. “ADP figures might be interesting because that least in the last two months the figures were very close to the non-farm payrolls, so today the ADP might catch some attention in the market.” The pound slid to the lowest in more than a year against the euro after reports showed U.K. house prices fell and construction growth slowed, limiting the case for interest-rate increases from the Bank of England ahead of tomorrow’s decision. Sterling traded near its lowest level since at least 1975 against a basket of its nine most-traded peers after the Nationwide Building Society reported the average cost of a British home dropped for the first time since January. The pound depreciated 0.1 percent to 90.03 pence per euro, after earlier sliding to 90.286, its weakest level since March 29, 2010. Britain’s currency was little changed versus the dollar at $1.6497. New Zealand Emigration The so-called kiwi dropped for a third day after Statistics New Zealand said permanent migrant departures exceeded arrivals by 530 in March, the most since a net 2,400 emigrants in February 2001. The exodus from New Zealand adds evidence to the government’s outlook for little-to-no growth after a magnitude 6.3 earthquake wrecked houses and closed businesses in Christchurch on Feb. 22. The Treasury Department said this week gross domestic product was “flat to slightly negative” in the first quarter and forecast 2011 growth will be about 1 percent. “New Zealand’s data today hasn’t really inspired positive sentiment toward the kiwi dollar with fairly weak migration numbers,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. New Zealand’s dollar slid 0.7 percent to 79.33 U.S. cents, after falling to 79.16 cents, the lowest since April 20. It fell 0.5 percent to 64.28 yen. 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.

Source