The yen fell against all of its 16 major counterparts as stocks rallied worldwide on optimism European officials will contain the region’s debt crisis, damping demand for Japan’s currency as a refuge. The euro headed for a weekly gain versus the dollar after European officials eased the terms of loans for cash-strapped nations and expanded aid for Greece. The yen slid from a four- month high versus the greenback after Japanese Finance Minister Yoshihiko Noda reiterated he’s watching markets closely because the currency’s moves have been “one-sided.” The dollar rose on speculation President Barack Obama and Republicans are getting closer to an agreement to cut the U.S. budget deficit. European leaders “could’ve been a little more aggressive and there are some residual questions to be answered, but they’ve done enough to protect the market at the moment,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “We will probably see some further weakening” in the yen. The yen fell to 113.09 per euro as of 1:23 p.m. in Tokyo from 112.94 in New York yesterday. It earlier slid to 113.29 per euro, the lowest since July 11. Japan’s currency dropped to 78.61 per dollar from 78.30, after reaching 78.22, the strongest since March 17. It’s up 0.7 percent this week against the dollar. The greenback rose to $1.4387 per euro from $1.4425. It touched $1.4439, the weakest since July 6. The dollar has fallen 1.6 percent against the euro this week. ‘Irreplaceable’ Euro French President Nicolas Sarkozy reiterated support for the euro after a summit yesterday on Europe’s debt crisis closed, saying it’s an “irreplaceable” achievement of the region. He compared the transformation of the bailout to the creation of a “European Monetary Fund.” The region’s 440 billion euro ($633 billion) European Financial Stability Facility will operate in the secondary markets, aid troubled banks and offer credit lines, European Union leaders said yesterday after the summit. South Korea’s won climbed to its strongest level in almost three years as the summit spurred demand for higher yields. “We got quite encouraging news from embattled Europe,” said Kim Jinju, a Seoul-based currency dealer with Korea Exchange Bank. “There is some caution among traders ahead of the psychologically important 1,050 level but the strong momentum will likely continue.” The won gained 0.4 percent to 1,050.60 per dollar. It touched 1,050.35, the strongest level since August 2008. The MSCI Asia Pacific Index of regional shares rose 1.1 percent. Euro Resistance The euro fell against the dollar for the first time in four days before a report today forecast to show German business confidence declined to the lowest level in eight months in July. The Ifo institute’s business climate index, based on a survey of 7,000 executives, will drop to 113.7 from 114.5 in June, according to the median forecast of economists in a Bloomberg News survey. That’s the least since November. “I don’t expect the euro to extend a gain beyond $1.45,” said Kengo Suzuki, manager of the foreign bond department in Tokyo at Mizuho Securities Co. “It’s impossible to solve the entire crisis in Europe because things change.” Demand for the dollar increased on reports the White House is cutting a deal with House Republicans to boost the U.S. debt ceiling and reduce deficits by about $3 trillion over 10 years without immediate revenue increases. U.S. Debt Obama’s team has told congressional leaders it is pursuing such a deal, according to two officials familiar with the talks, as the White House and House Speaker John Boehner of Ohio denied one was at hand. “The dollar has been bought back when reports about a solution came up in the past,” Mizuho’s Suzuki said. “The bias is for the dollar to be purchased when similar talk comes up.” The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, was at 74.119 today from 73.998 yesterday, when it slid 1.1 percent. The index has fallen 1.3 percent this week. The Australian dollar was set for the first weekly advance in three after a government report showed the nation’s import costs unexpectedly rose in the second quarter. Import prices gained 0.8 percent in the second quarter, the Australian Bureau of Statistics reported today. Economists surveyed by Bloomberg News had called for a 1.1 percent drop. The Australian dollar traded at $1.0839 from $1.0841. The so-called Aussie was set for a 1.8 percent gain this week. To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

Source