The euro gained against the dollar and yen as German Chancellor Angela Merkel said the European Union remains committed to its shared currency and the outlook for German growth is “very positive.” The yen stayed lower against the dollar and the euro as Prime Minister Naoto Kan survived a no-confidence vote after appealing to ruling party dissidents by offering to step down once his work to lead a recovery from March’s earthquake is accomplished. The New Zealand dollar dropped for a second day versus the yen after Fonterra Cooperative Group Ltd. said whole milk powder prices fell to a four-month low at an auction. “There is a perception in the market that European leaders will slowly but surely find a way out of the debt problem and to save the euro,” said Neil Jones, head of European hedge fund sales at Mizuho Corporate Banking Ltd. in London. “Greece may have to roll over its debt and that could work even though pushing the burden to the next generation is not ideal. The economic outlook for the region overall remains positive and interest rates are likely to rise further.” The euro rose 0.3 percent to $1.4375 as of 8:36 a.m. in London from $1.4328 in New York yesterday, when it reached $1.4459, the most since May 6. Europe’s common currency climbed 0.2 percent to 116.18 yen. The dollar weakened 0.2 percent to 80.82 yen after earlier advancing 0.5 percent. Price Stability The euro was stronger against 12 of its 16 major counterparts before European Central Bank President Jean-Claude Trichet speaks in Germany. Yesterday he said the ECB “will continue to deliver price stability.” The cost of living in the euro region increased 2.7 percent in May, a report showed on May 31. Inflation in the region has breached the ECB’s 2 percent limit since December and is forecast by its staff to average 2.3 percent this year. The bank raised its key interest rate by 25 basis points to 1.25 percent in April, even as Portugal joined Greece and Ireland in requesting financial aid from the European Union and the International Monetary Fund. In comparison, the Federal Reserve and Bank of Japan are holding rates near zero. “We don’t have a euro problem in Europe,” Merkel said in a speech in Singapore today on the final day of a three-day Asia trip that also took her to India. “We have more of a debt problem. Financial markets doubt whether some EU states can manage their debt in the long-term.” Germany is committed to the euro, which is stable, she said. Confidence Vote In Japan, the Diet’s lower house voted 293-152 against the no-confidence motion against Kan, as opposition lawmakers failed to attract enough support from his Democratic Party of Japan. Former DPJ premier Yukio Hatoyama called for party unity in rejecting the bill after Kan said he would step down once the disaster is contained. Deepening discontent over the government’s handling of the March earthquake and tsunami that precipitated the worst nuclear disaster in 25 years prompted the measure. The euro has gained 2.3 percent this year, versus a 5.4 percent drop by the dollar and a 5.5 percent decline for the yen, according to Bloomberg Correlation-Weighted Currency Indexes. Losses in the yen were trimmed as stocks extended a worldwide slump on concerns over slowing U.S. growth. The MSCI Asia Pacific Index fell as much as 1.9 percent. The Stoxx Europe 600 Index fell 0.9 percent. Bookings for manufacturers’ goods in the U.S. declined 1 percent in April, the most since October, the Commerce Department is forecast to say today, according to a Bloomberg News survey of economists. Non-Farm Payrolls The Labor Department will release May unemployment figures tomorrow. Goldman Sachs Group Inc. yesterday revised its estimate for an increase in May nonfarm payrolls to 100,000 from 150,000, while Citigroup Inc. trimmed its projection to 100,000 from 170,000. The median estimate in a Bloomberg News survey is for a gain of 170,000 following a 244,000 April increase. “The focus for the market in general is going to be on the global growth situation,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong. “The ability of risk assets like the euro to rally will be somewhat limited.” New Zealand’s dollar slumped against 15 of its 16 major peers on concern export revenue will be hurt by falling milk prices. Auckland-based Fonterra, the world’s largest dairy exporter, said near-term contracts for whole milk powder prices declined to the lowest since Jan. 18. The so-called kiwi fell 0.2 percent to 65.82 yen and to 81.30 U.S. cents from 81.46 yesterday. To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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