The euro fell, snapping a two-day advance against the dollar, as European Union officials struggled to break a deadlock on a second Greek rescue plan. Australia’s dollar was the best performer versus the shared European currency after central bank Governor Glenn Stevens reiterated that policy makers will need to raise interest rates at some stage. Demand for the greenback may be capped by estimates that U.S. reports today will show inflation slowed and homebuilder confidence stayed weak. The pound advanced versus the euro as data showed U.K. consumer confidence surged. “There’s still a lot of uncertainty about how the Greek debt issue will be resolved, and that’s putting some pressure on the euro,” said Lutz Karpowitz, a currency strategist at Commerzbank AG in Frankfurt. “The main problem is how to involve the private bondholders in a new rescue package. We’re still pretty confident a solution will be found and once that happens, it should be positive for the euro.” The euro lost 0.9 percent to $1.4314 at 10:45 a.m. in London and fell 0.7 percent to 115.45 yen. Japan’s currency traded at 80.66 per dollar from a previous New York close of 80.49, after reaching 80.69 on June 13, the lowest level since June 3. The euro has depreciated about 1 percent in the past week against nine other currencies of developed economies, according to Bloomberg Correlation-Weighted Currency Indexes. The yen has fallen 0.3 percent and the dollar has risen 0.8 percent. German-French Meeting German Chancellor Angela Merkel and French President Nicolas Sarkozy will meet on June 17 in Berlin, with pressure mounting for the leaders to resolve their differences over a rescue for Greece, which was downgraded this week to the world’s lowest credit rating by Standard & Poor’s. EU finance ministers yesterday agreed to convene again on June 19 after they failed to reconcile a German-led push for bondholders to share part of the cost of a new Greek aid plan. European Central Bank warnings were backed by France that the move might constitute the region’s first sovereign default. “There are still worries over Greece, given uncertainty about how it can avoid a credit event such as a default,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “Financial damage could be widespread. It’s a reason to sell the euro.” ECB policy makers have warned against German proposals for extending Greek bond maturities for seven years, which rating companies have said would be considered a default. ECB President Jean-Claude Trichet, who attended yesterday’s meeting, said on June 9 that governments were flirting with what may be an “enormous mistake.” Pound, Aussie Sterling appreciated 0.3 percent to 87.94 pence per euro, touching a two-week high. U.K. consumer confidence jumped the most in 5 1/2 years in May as Britons became less pessimistic about spending and the extra public holiday for the royal wedding led to a “feel-good factor,” Nationwide Building Society said. Nationwide’s index of sentiment gained 11 points from April to 55, the highest in five months. The pound held gains versus the euro even after U.K. jobless claims surged more than economists expected in May, climbing by 19,600 from April, when they rose a revised 16,900, according to the Office for National Statistics. The median forecast of 22 economists surveyed by Bloomberg was an increase of 6,500. Britain’s currency fell against the dollar after the jobless data, losing 0.3 percent to $1.6323. Australia’s dollar reversed earlier losses after Reserve Bank of Australia Governor Stevens signaled inflation data next month may be key for the timing of an interest-rate increase. “New information will, as always, be important in our monthly assessments of what monetary policy needs to do,” Stevens said in prepared remarks today in Brisbane, the capital of Queensland state. “As far as prices are concerned, we will get another comprehensive round of data in late July.” The so-called Aussie erased an earlier decline of as much as 0.3 percent against the dollar to trade 0.1 percent stronger at $1.0696. Against the euro, Australia’s dollar appreciated 0.7 percent to 1.34192, a fifth straight advance. U.S. Economy Gains in the U.S. dollar were curbed by prospects growth is moderating in the world’s largest economy, underpinning the case for the Federal Reserve to keep interest rates near zero. The consumer-price index increased 0.1 percent in May, after a 0.4 percent gain in April, according to a Bloomberg News survey of economists before today’s report. The National Association of Home Builders/Wells Fargo sentiment index held at 16 this month, a separate Bloomberg survey showed before the Washington-based group releases the data today. “If there’s any sign that CPI is weakening a little bit, that would probably be dollar negative,” said Gareth Berry, a foreign exchange strategist at UBS AG in Singapore. “Some in the market might interpret a weak CPI as giving the Fed increased room to maneuver if they wanted to see more quantitative easing sometime down the road.” The Fed’s $600 billion program of buying Treasuries to stimulate the economy is ending this month. To contact the reporters on this story: Garth Theunissen in London gtheunissen@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net; To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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