The Swiss franc climbed against all of its 16 most-traded counterparts, reaching a record against the euro, as surging bond yields in Italy revived concern that Europe’s debt crisis will worsen amid slowing global growth. The yen erased losses versus the dollar after U.S. consumer spending unexpectedly dropped in June for the first time in two years. Australia’s dollar tumbled after the nation’s central bank kept its key interest rate unchanged. The Senate ratified a measure raising the U.S. debt limit and lowering spending, fueling speculation budget cuts will damp the recovery. “The debt-ceiling issue is almost over, and the market is focusing on the concern for the world economy and European countries,” said Mamoru Arai, a senior currency trader at Mizuho Financial Group Inc. in New York. The franc gained as much as 2.9 percent to 1.0847 per euro, a record high, before trading at 1.0887 at 1:03 p.m. in New York, up 2.5 percent. The euro declined 0.3 percent to $1.4205 after depreciating to as low as $1.4151. It weakened 0.6 percent to 109.38 yen. Japan’s currency gained 0.3 percent to 77.01 per dollar, from 77.21 yesterday, after falling 0.8 percent earlier. U.S. consumer purchases fell 0.2 percent after a 0.1 percent rise in May, Commerce Department data showed today. The median estimate had been for a 0.1 percent increase. Incomes grew 0.1 percent, the slowest pace since November. The franc advanced as Swiss retail sales increased and manufacturing unexpectedly accelerated, suggesting the nation is not suffering from its record strength. 24 Percent Gain The Swiss currency climbed 24 percent in the past 12 months, making it the best performer among 10 major-economy currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen rose 0.9 percent, while the dollar is down 11 percent and the euro declined 3.6 percent. The euro fell as the European Union’s statistics office in Luxembourg said producer-price inflation slowed to 5.9 percent from 6.2 percent in May. Losses by Italian 10-year bonds pushed yields up to a euro-era record versus benchmark German bunds. Spanish bonds also slumped before sales this week of 2014 and 2015 securities. European leaders agreed last month on a second bailout for Greece in a bid to restore investor confidence and stop the sovereign-debt crisis from spreading. “In their July meetings, Europeans were so focused on Greece they didn’t increase the size of rescue fund to backstop potential problems with Italy and Spain,” said Greg Anderson, a senior currency strategist at Citigroup Inc. in New York. “This morning’s news is new highs in Spanish and Italian spreads, and that shifts focus back to Europe.” Dollar Index The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, rose 0.3 percent to 74.484. Demand for the dollar was limited on concern a plan agreed to by between President Barack Obama and Congressional leaders to raise the debt ceiling and reduce the budget deficit will weigh on growth in the world’s biggest economy. The Senate approved legislation to raise the U.S. debt limit by at least $2.1 trillion and cut federal spending by $2.4 trillion or more, sending the measure to Obama. The House passed it yesterday. Standard & Poor’s said July 14 it may cut the U.S. AAA rating if an agreement to lift the debt ceiling doesn’t include “credible” deficit cuts. John Taylor, founder of the world’s largest currency-hedge fund, said the dollar will remain the global reserve currency even if the U.S. loses the top credit rating. ‘No Alternative’ “There really is absolutely no alternative to the dollar in the next five to 10 years,” Taylor, chief executive officer of FX Concepts LLC, said in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. Japan’s currency reached 76.30 cents yesterday, the strongest level since March. Finance Minister Yoshihiko Noda said the nation’s currency is overvalued and he’s watching markets closely. Officials are concerned the yen’s strength will hurt domestic companies and undermine the nation’s recovery from the March 11 earthquake and tsunami, the Nikkei newspaper reported, without saying where it got the information. Noda declined to comment today on possible currency intervention when speaking to reporters in Tokyo. Japan last intervened on March 18, joining Group of Seven counterparts in selling the yen a day after it jumped to a record against the dollar. ‘Requires Intervention’ “The strength of the yen is getting to the point where it requires intervention in some form,” said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp. Speculation that Japan will move to weaken the currency “is a story, and the fact that the dollar-yen has bounced a bit tells you that the market is listening to the stories.” Australia’s dollar tumbled 1.5 percent to $1.0809, the lowest level in a week. Reserve Bank of Australia Governor Glenn Stevens held the overnight cash-rate target at 4.75 percent for a record eighth straight meeting, saying “the board remains concerned about the medium-term outlook for inflation.” He cited “the acute sense of uncertainty” in financial markets as a factor for inaction. To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net

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