The dollar fell against most of its major counterparts after a private report signaled manufacturing in China shrank at a slower pace this month than in July, supporting demand for higher-yielding assets. The Australian and New Zealand currencies strengthened the most against the dollar as Asia’s benchmark stock index rallied from its lowest level in almost a year. The yen dropped for a third day versus the euro after Japan’s Finance Minister Yoshihiko Noda said excessive currency movements may hurt the nation’s recovery. Euro gains were tempered before reports that economists said will show German manufacturing slowed and investor confidence declined. “The stronger Chinese PMI data is helping riskier currencies and stock markets and pushing the euro up a little bit against the dollar,” said You-na Park, a currency strategist at Commerzbank AG in Frankfurt. “The focus for euro- dollar today will also be on the German PMI numbers. A stronger- than-expected number would boost the euro.” The dollar weakened 0.3 percent to $1.4399 per euro at 8:01 a.m. in London. The yen fell 0.2 percent to 110.52 against the 16-nation European currency, and was little changed at 76.75 per dollar after rising to a post-World War II record of 75.95 on Aug. 19. Australia’s dollar advanced 0.6 percent to $1.0473. China Manufacturing A preliminary gauge of China manufacturing in August was 49.8, according to a reading of the Purchasing Managers’ Index reported by HSBC Holdings Plc and Markit Economics today. The final reading for July was 49.3. A figure below 50 indicates a contraction, and the final number for August is due Sept. 1. The so-called flash PMI reading was better than the “rumored” number of 45 and may provide some relief to the market, Bank of America Merrill Lynch’s Ting Lu said. The official PMI index for August to be released by the National Bureau of Statistics may be above the 50 point threshold for expansion, the Hong Kong-based economist wrote in a note today. “The Chinese data suggested the market doesn’t need to be too pessimistic about the growth pace in China,” said Minori Uchida, a senior analyst in Tokyo at Bank of Tokyo-Mitsubishi. The boost to equity-market sentiment helped “risk currencies such as the euro and Aussie,” he said. The MSCI Asia Pacific Index of stocks rose 1.8 percent and the Stoxx Europe 600 Index advanced 1.4 percent, extending its rebound from a two-year low, amid speculation the Federal Reserve will this week announce further monetary stimulus to bolster the economy. Europe Slowing Demand for the euro was capped by concern slowing growth in Europe will make it harder for the region to contain its sovereign debt crisis. A manufacturing purchasing managers’ index for Germany fell to 50.6 in August from 52 the previous month, according to the median forecast of economists surveyed by Bloomberg News before the Markit Economics report. The ZEW Center for European Economic Research in Mannheim will say its index of German investor and analyst expectations, which aims to predict developments six months in advance, fell to minus 26 in August from minus 15.1 in July, a separate survey showed. The German economy almost stalled in the second quarter with gross domestic product, adjusted for seasonal effects, rising 0.1 percent from the previous quarter, according to an Aug. 16 report. “The worry will be that if the Q2 weak growth that we saw out of the core nations in Europe looks like it’s going to persist then there will be concerns about whether Europe really can grow out of this mess,” said Robert Ryan, a currency strategist at BNP Paribas SA in Singapore. “We’re short-term bearish,” on euro which may weaken toward $1.41, he said. Bernanke’s Speech A manufacturing gauge for the euro-area declined to 49.5, the first contraction since September 2009, another Bloomberg survey showed before the figures today. Federal Reserve Chairman Ben S. Bernanke is scheduled to speak on Aug. 26 in Jackson Hole, Wyoming, amid speculation he will signal additional steps to boost the U.S. economy. “A big focus for the market this week will be what Bernanke says at Jackson Hole,” Commerzbank’s Park said. The yen fell against 14 of its 16 major counterparts amid speculation Japan will act to curb the currency’s recent gains. Finance Minister Noda said he is examining how much speculative trading is influencing the yen’s moves and measures to address it may be needed in the government’s budget. “There is a little bit of fear in the market for an intervention from the Bank of Japan,” said Tsutomu Soma, a bond and currency dealer in Tokyo at Okasan Securities Co. “Investors can’t aggressively buy the yen now as much as they want because some big events are ahead, such as Bernanke’s speech and the leadership election for the ruling party.” Prime Minister Naoto Kan told his cabinet today that he will resign after the passage of legislation including a deficit-covering bond bill, Kyodo News reported, without saying where it got the information. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Garth Theunissen in London gtheunissen@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net; Daniel Tilles at dtilles@bloomberg.net

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