The euro extended its second straight weekly drop against the dollar before reports forecast to show an expansion in industrial production in the region stalled and Greece’s economy shrank. The 17-nation currency was set for its biggest weekly drop in three months against the yen as traders bet the European Central Bank will cut its key interest rate as austerity measures crimp growth. The Australian and New Zealand currencies weakened before data that may show confidence among U.S. consumers dropped to the lowest level in more than two years, damping demand for higher-yielding assets. “The market is now factoring in rate cuts from the ECB and the data will potentially start to be a factor as well, as you have seen some slowing,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “You continue to look at some of the weak data points out there and it suggests euro is going to come lower.” The euro weakened to $1.4192 as of 1:18 p.m. in Tokyo from $1.4241 yesterday in New York and $1.4282 on Aug. 5. The common currency declined 0.4 percent to 108.96 yen, set for a 2.7 percent drop this week, the most since the period ended May 6. The dollar bought 76.80 yen from 76.84 yesterday. The Swiss franc climbed 0.6 percent to 1.07840 per euro, paring yesterday’s 5 percent plunge. Industrial production in the euro area was unchanged in June after a 0.2 percent increase in May, according to a Bloomberg News survey of economists before a report from the European Union’s statistics office in Luxembourg today. Greek GDP Greece, which is struggling to curb budget deficits that sparked the region’s sovereign-debt crisis, will probably report that gross domestic product fell 0.8 percent in the second quarter from the previous period when it rose 0.2 percent, according to the median estimate of four economists in a Bloomberg News survey. That would be the ninth contraction in the last 11 quarters. Declines in the euro were limited after the European Securities and Markets Authority signaled that France, Spain, Italy and Belgium will impose bans on short-selling from today to stabilize markets after European banks including Societe Generale SA hit their lowest level since the credit crisis. National regulators will impose the bans, the group said in a statement after talks ended late yesterday. French President Nicolas Sarkozy and German Chancellor Angela Merkel will meet next week after concerns over the spread of the region’s debt crisis rattled French markets. “If we do see follow-through equity market gains Friday, this should help protect the floor under euro-dollar,” BNP Paribas SA strategists including Ray Attrill wrote in an e- mailed note to clients. Consumer Confidence A preliminary reading of the Thomson Reuters/University of Michigan index of consumer sentiment fell to 62 this month, according to the median estimate in another survey before today’s data. That would be the lowest since March 2009. New Zealand’s dollar declined against all 16 major peers as prospects for slower global growth damped demand for higher- yielding assets. The kiwi fell 1 percent to 82.33 U.S. cents and weakened 1.1 percent to 63.25 yen. Australia’s dollar slipped 0.6 percent to $1.0286 and dropped to 79.06 yen from 79.55. The kiwi and Aussie “will be hostage to wider global developments,” said Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington. “Investors will still be pretty tentative.” Gains in the yen were tempered as Asian stocks extended a rally in global equities, sapping refuge demand. Stocks Rebound The MSCI Asia Pacific Index of regional shares rose 0.2 percent. Standard & Poor’s 500 Index rose 4.6 percent yesterday after Labor Department data showed initial claims for jobless benefits in the U.S. unexpectedly fell last week to a four-month low of 395,000. “If we see more good economic numbers, it may reverse the extremely pessimistic view for global growth the market has had,” said Morio Okayasu, chief analyst in Tokyo at FOREX.com Japan Co., a unit of the online currency trading firm Gain Capital in Bedminster, New Jersey. “That will also help calm the currency market too, in which overbuying of the yen may be subdued.” U.S. retail sales gained 0.5 percent in July from June, when they rose 0.1 percent, the biggest increase in four months, according to the median estimate of economists surveyed by Bloomberg News ahead of today’s data. The JPMorgan Global FX Volatility Index fell to 13.83 yesterday, after climbing to 14.72, the highest since June 2010. The yen strengthened yesterday to as high as 76.31 per dollar, nearing a record high of 76.25 reached on March 17. China’s Yuan China’s yuan headed for the biggest weekly advance since December 2007 on signs China will favor a stronger currency to tame inflation, which accelerated to a three-year high in July. The People’s Bank of China may rely more on appreciation to ease imported inflationary pressure as it doesn’t want to spur capital inflows by raising interest rates, the China Securities Journal said in a front-page commentary today. Consumer prices rose 6.5 percent from a year earlier in July. “We still haven’t seen the peak of China’s inflation,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “It’s logical the government is using currency gains to curb inflation.” Theyuann was little changed at 6.3948 per dollar and has gained 0.7 percent this week. To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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