The euro rose to a one-week high against the greenback after Germany and France reached an agreement on addressing Greece’s debt crisis before a summit convened to prevent contagion in Europe’s bond markets. The 17-nation currency also climbed to the highest level in a week versus the yen before the joint Franco-German position is presented at the meeting in Brussels. The dollar dropped to a one-week low against the yen on concern U.S. policy makers will struggle to agree on a plan to cut the nation’s deficit and increase the debt limit. Australia’s dollar weakened after data showed Chined manufacturing slowed. “The report on the common position of Germany and France indicates their intention that they wanted some preparation for the summit,” said Yuki Sakasai, a currency strategist at Barclays Bank Plc in Tokyo. “It’s hard to sell the euro for the time being because of expectations for the region’s coordinated attitude.” The euro advanced to $1.4241 as of 12:12 p.m. in Tokyo from $1.4215 in New York yesterday, after touching $1.4274, the highest level since July 14. The common currency reached 112.52 yen, the strongest since July 14, before trading at 112.13 from 111.99 yen. The dollar slid to 78.67 yen, the weakest since July 14, before fetching 78.73 from 78.78 yen. The euro gained 0.5 percent to 1.17095 Swiss francs, and reached 1.17497, the highest since July 12. ‘Make or Break’ Euro-area government chiefs will convene today for the second time in a month as they aim to break a deadlock over a new Greek rescue. While German Chancellor Angela Merkel said this week the crisis can’t be resolved in “one spectacular step,” Greek Prime Minister George Papandreou said in an interview that the summit could be a “make-or-break moment” for the euro region. Merkel and French President Nicolas Sarkozy reached agreement after seven hours of talks at the Chancellery in Berlin today and details will be released at today’s summit, the governments said in a statement. The discussions also included European Central Bank President Jean-Claude Trichet and European Union President Herman van Rompuy, who participated by telephone. European leaders are at odds with one another and with the ECB over demands by Germany and Finland that private investors bear some of the burden of a new Greek bailout. Proposals for a voluntary rollover of Greek debt met with warnings from credit- rating companies that they would declare a default. Voluntary Rollover “Even if officials can persuade the private sector to do a voluntary rollover, they still have to see how rating agencies would react,” said Daisuke Karakama, a market economist in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan’s third- biggest financial group by market value. “I won’t be surprised if the euro falls below $1.40.” The Dollar Index slid for a third day as the Obama administration signaled it may accept a short-term increase in the U.S. debt limit only if it’s combined with a major agreement to cut the deficit. President Barack Obama “must have a firm commitment to something big,” White House spokesman Jay Carney told reporters yesterday. Obama met with top congressional Democrats as the Aug. 2 deadline for raising the $14.3 trillion debt limit nears. The president this week endorsed a plan from the Gang of Six, a bipartisan group of U.S. senators, that may help speed up negotiations. IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, fell 0.2 percent to 74.694. Bipartisan Plan “In terms of the debt ceiling issue, the market focus is shifting to how policy makers will hammer out details on a bipartisan plan to cut deficits,” said Junichi Ishikawa, a Tokyo-based market analyst at IG Markets Securities Ltd. “The market wants to see how the situation will develop, and so people can’t buy the dollar.” The so-called Aussie snapped a two-day advance as China’s preliminary purchasing managers’ index, compiled by HSBC Holdings Plc and Markit Economics, dropped to 48.9 in July from a final reading of 50.1 in June. A number above 50 indicates expansion. China is Australia’s largest trading partner and New Zealand’s second-largest export destination. Australia’s currency declined 0.3 percent to $1.0720. The so-called kiwi was little changed at 85.62 U.S. cents after earlier touching a record 85.88 cents. To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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