The euro was set for its first weekly gain against the yen in three weeks on prospects costs for dollar funding will drop after the European Central Bank said it will lend U.S. currency to euro-area banks. The 17-nation currency rose against all of its 16 major counterparts this week before euro-area finance ministers meet today. The dollar held yesterday’s advance versus the yen before a report forecast to show U.S. consumer confidence this month rebounded from the lowest since November 2008. Australia’s dollar slid for a second week against the greenback before the country’s Reserve Bank releases minutes of its most recent policy meeting. The ECB’s “liquidity plan boosted the euro and European bank shares,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “On the funding side, the concern may have eased a little bit.” The euro bought 106.45 yen as of 1:12 p.m. in Tokyo from 106.43 yen in New York yesterday. It was poised for a 0.4 percent advance this week. The shared currency traded at $1.3857 from $1.3877 and has gained 1.5 percent since Sept. 9. The dollar was at 76.82 yen from 76.70 yesterday. ECB Lending Plan The ECB said it will lend dollars to banks in the euro zone in a series of three-month loans. The Frankfurt-based bank said it will coordinate with the Federal Reserve and other central banks to conduct three separate dollar liquidity operations to ensure lenders have enough of the currency through the end of the year. The three-month loans are in addition to the bank’s regular seven-day dollar offerings and will be fixed-rate tenders with full allotment, the ECB said in a statement yesterday. They will be offered on Oct. 12, Nov. 9 and Dec. 7. The cost of converting euro payments into dollars, measured by the three-month cross-currency basis swap, declined to 84 points below the euro interbank offered rate, or Euribor, in London from 107.2 points a week ago. ECB President Jean-Claude Trichet pressed euro-area governments to take decisive action to halt the debt crisis and show “unity of purpose” at today’s gathering of European finance ministers in Wroclaw, Poland. “We are not back to ‘business as usual’ as some thought some months ago,” Trichet said late yesterday in the Polish city. “We call all authorities to implement swiftly all decisions and to be constantly ahead of the curve.” ‘More Reassurance’ Eighteen months of crisis-fighting and 256 billion euros ($354.8 billion) in aid for Greece, Ireland and Portugal have failed to stabilize markets. The turmoil has spread to Italy and Spain, sending tremors through Europe’s banking system and leading to speculation that the currency might break up. “We certainly need to see a lot more reassurance out of Europe before a more sustainable recovery in risk assets,” said Thomas Averill, a director in Sydney at Rochford Capital, a currency and interest-rate risk management company. The euro will “really struggle to make it back to $1.40.” Finance ministers and central bankers from the European Union’s 27 member states will meet later today and tomorrow. U.S. Treasury Secretary Timothy Geithner will also be attending the event. The dollar has risen against most of its major peers this week before a report that may show an improvement in consumer confidence, curbing speculation that the central bank may engage in additional easing. It has appreciated 3 percent in the past month, the best performance, alongside the yen, among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. No ‘Double-Dip’ “We’re not expecting the U.S. Economy to return to double dip recession,” said Rochford’s Averill. A preliminary reading for September will show the Thomson Reuters/University of Michigan index of consumer sentiment rose to 57 after falling to 55.7 in August, according to the median estimate of economists surveyed by Bloomberg News before today’s report. Federal Reserve policy makers will meet Sept. 20-21. The Australian dollar is poised for a second weekly loss versus the dollar on speculation the central bank will cut interest rates this year. “We have to be bearish on the Australian dollar in the near term,” said Masashi Murata, vice president of foreign exchange in Tokyo at BBH Investment Services Inc., a unit of New York-based Brown Brothers Harriman & Co. “Regardless of whether it will actually happen, the market is pricing in a rate cut, weighing on the Aussie.” The Reserve Bank of Australia left its benchmark interest rate unchanged at 4.75 percent on Sept. 6. Cash-rate futures show traders are betting Governor Glenn Stevens will cut rates by at least 75 basis points by December. Australia’s dollar was at $1.0339 from $1.0328, set for a 1.3 percent loss this week. The currency was at 79.39 yen from 79.21. It has lost 2.3 percent since Sept. 9. To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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