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 a report may show the U.S. unemployment rate probably held at 9.1 percent. “We had this insipient risk recovery last week, and it has all of a sudden stalled,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “Moody’s has been in the news saying that the recent rollover plan constitutes a credit event. We thought Greece was taken off the table last week, and it’s still there, so that’s taken the steam out of the euro.” The dollar appreciated 0.6 percent to $1.4464 per euro at 11:42 a.m. in New York, from $1.4539 yesterday, when it touched $1.4578, the weakest level since June 9. The greenback climbed 0.4 percent to 81.14 yen, from 80.80. The euro was little changed at 117.32 yen, compared with 117.47. The Swiss franc, a traditional haven from economic turmoil, rallied against all of its major counterparts, appreciating 0.3 percent to 84.51 centimes per dollar and climbing 0.9 percent to 1.2218 per euro. China is likely to raise rates to combat consumer-price increases that may have reached 6.2 percent in June, said the Economic Information Daily, citing market estimates. That followed comments by the People’s Bank of China yesterday that the country still faces “large” inflationary pressure. Drop in Stocks The Standard & Poor’s 500 Index fell 0.3 percent after rallying 5.6 percent last week. Yields on Treasury 10-year notes dropped five basis points to 3.13 percent today. The Australian dollar weakened against the greenback after the South Pacific 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.” Drop in Aussie Australia’s currency fell 0.4 percent to $1.0694 and traded little changed at 86.65 yen. 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. IntercontinentalExchange Inc’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, rose 0.3 percent to 74.508. The gauge slid yesterday to 74.111, the lowest level since June 10. Bookings for U.S. manufacturers’ goods rose 0.8 percent in May, less than the median forecast of 60 economists in a Bloomberg News survey, after a revised 0.9 percent decline in April that was smaller than previously estimated, figures from the Commerce Department showed today. U.S. employers added 100,000 jobs in June after an increase of 54,000 in the previous month, according to the median forecast of 77 economists in a Bloomberg News survey before the Labor Department’s July 8 report. Moody’s on Greece The euro weakened after Moody’s said in a report dated yesterday 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 said yesterday the bond-rollover plan would likely qualify as a distressed exchange and prompt a “selective default” grade on Greek securities. Greece’s Prime Minister George Papandreou secured passage last week of 78 billion euros ($113 billion) of additional budget cuts and revenue measures needed to meet bailout targets. The ECB on July 7 will probably increase its main refinancing rate to 1.50 percent from 1.25 percent, according to all 54 economists in a Bloomberg News survey. ECB President Jean-Claude Trichet last week reiterated that policy makers are in a state of “strong vigilance,” a phrase he has used before tightening monetary policy. “The rate hike is pretty much a done deal in the market,” said Steven Englander, head of Group of 10 currency strategy at Citigroup Inc. in New York. “The market feels the ECB will still be hiking in the first part of the year.” To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net To contact the editor responsible for this story: Robert Burgess at bburgess@bloomberg.net

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