The dollar advanced versus most of its major counterparts on speculation China’s efforts to tame inflation will cool growth and damp demand for riskier assets. The euro dropped for the first time in seven days versus the greenback after Moody’s Investors Service said banks rolling over Greek bonds into new securities may incur impairment charges. The European Central Bank is forecast by economists to raise interest rates at its meeting this week, and the U.S. unemployment rate probably held at 9.1 percent. “We’re consolidating ahead of this week’s big events,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York. “It doesn’t look like there will be a resolution on Greece anytime soon.” The dollar appreciated 0.4 percent to $1.4477 per euro at 9:43 a.m. in New York, from $1.4539 yesterday, when it touched $1.4578, the weakest level since June 9. The greenback climbed 0.3 percent to 81.04 yen, from 80.80. The euro dropped 0.1 percent to 117.32 yen, from 117.47. The yen weakened versus the dollar after Japan’s Finance Minister Yoshihiko Noda said the government may run out of money as early as October unless a bill authorizing bond sales is passed in parliament. “If the market begins to sense there is potential sovereign debt, budgetary-type issues, and when you’ve got a very senior official making comments in that line, then you can see why the market is selling yen,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. Stronger Franc The Swiss franc, a traditional haven from economic turmoil, appreciated 0.3 percent to trade at 84.47 centimes per dollar. It climbed 0.8 percent to 1.2231 per euro. China is likely to raise rates to combat consumer-price increases that may have reached 6.2 percent in June, the Economic Information Daily said, citing market estimates. That followed comments by the People’s Bank of China yesterday that the country still faces “large” inflationary pressure. IntercontinentalExchange Inc’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, rose 0.2 percent to 74.495. The euro weakened after Moody’s said in a report dated July 4 that banks agreeing to roll their Greek government bonds into new securities may incur impairment charges on debt maturing through June 2014 that they continue to hold. The rollover is being discussed as part of a French plan to involve private creditors in the Greek rescue by repaying them at par as their securities mature and getting them to reinvest most of the cash in new, 30-year notes backed by AAA-rated collateral. S&P on Rollover Standard & Poor’s said yesterday a bond-rollover plan drafted by French banks that serves as the basis for talks between investors and governments would likely qualify as a distressed exchange and prompt a “selective default” grade on Greek securities. The dollar has advanced 0.7 percent in the past month against a basket of nine developed-market peers, according to Bloomberg Correlation-Weighted Currency Indexes. Companies from Pfizer Inc. to Cisco Systems Inc. may use a proposed reduction in tax on repatriated profits to bring back as much as $700 billion to create jobs and spur investment, according to a study by the Congressional Joint Committee on Taxation. That’s double the amount from the last tax holiday in 2005, which helped strengthen the Dollar Index 13 percent, the biggest rally in eight years. Tax Debate Legislation introduced in May by Representative Kevin Brady, a Texas Republican, would allow companies to repatriate their profits at a 5.25 percent tax rate, below the current 35 percent corporate level. “The dollar is gaining some support on the back of speculation over the prospect of a Homeland Investment Act II,” said Lee Hardman, a currency strategist at Bank of Tokyo- Mitsubishi UFJ Ltd. in London. “In the near term at least those expectations are supporting the dollar.” The Australian dollar weakened against the greenback counterparts after the nation’s central bank left borrowing costs unchanged. The Reserve Bank of Australia kept its cash rate target at 4.75 percent for a seventh straight meeting as signs of slower growth from Europe to China dimmed prospects for an acceleration in hiring at home. “It looks like the RBA has revised down growth in their forecasts,” said Richard Grace, chief currency strategist in Sydney and international economics head at Commonwealth Bank of Australia. “You’d expect local bond yields to adjust a little lower, and therefore interest-rate spreads will compress and put some mild dampening pressure on the Australian dollar.” Australia’s currency fell 0.4 percent to $1.0693 and traded little changed at 86.65 yen. To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Lucy Meakin in London at lmeakin1@bloomberg.net To contact the editor responsible for this story: Robert Burgess at bburgess@bloomberg.net

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