The euro traded 0.5 percent from its strongest in almost three weeks after a China state-run fund said it began buying shares of the nation’s biggest banks, bolstering Asian stocks and demand for higher-yielding assets. The 17-nation euro maintained yesterday’s advance against the yen which came after Germany and France pledged to deliver a plan to support banks. The U.S. currency traded near a one-week low versus the Swiss franc before the Federal Reserve releases minutes of its September meeting. The pound weakened before a report that may show U.K. industrial production contracted for a second month in August. Malaysia’s ringgit advanced after the nation’s industrial output rose in August. “This is the government of China thinking their own bank stocks are cheap, and that’s going to boost the entire Asia equity market again,” said Kurt Magnus, executive director of currency sales in Sydney at Nomura Holdings Inc., Japan’s biggest brokerage. “You have to be chasing yield now and that will keep currencies like the dollar and yen on the back foot.” The euro traded at $1.3632 as of 1:44 p.m. in Tokyo from $1.3642 in New York yesterday, when it reached $1.3699, the strongest level since Sept. 21. The shared currency fetched 104.51 yen from 104.59 yesterday. The dollar was at 76.67 yen from 76.68. It bought 90.46 centimes from 90.37 yesterday, when it dropped to as low as 90.03, the least since Sept. 30. The MSCI Asia Pacific index of shares advanced 2.2 percent. The Standard & Poor’s 500 Index gained 3.4 percent yesterday. Chinese Buying China’s state-run Central Huijin Investment Ltd. started acquiring stock in Industrial & Commercial Bank of China (1398) Ltd., China Construction Bank Corp., Agricultural Bank of China Ltd. and Bank of China Ltd. yesterday, according to a statement on its website. The fund will continue with “related market operations,” it said, without providing details on how much it will invest and whether it will buy the shares in Hong Kong or Shanghai. Germany and France on Oct. 9 set an end-of-month deadline for a breakthrough in handling Europe’s sovereign debt crisis, which has pushed Greece to the brink of default and roiled global markets. German Chancellor Angela Merkel and French President Nicolas Sarkozy put recapitalization of the region’s banks at the top of the priority list in a joint declaration in Berlin. Sarkozy said they would deliver a plan by the Nov. 3 Group of 20 meeting. “The market is pricing in a disaster and there is no disaster,” said Magnus. “The Aussie, kiwi and euro should benefit the most.” Slovakia Vote Gains in the euro were limited after Slovakia’s ruling coalition failed to end a dispute over participation in a euro- area bailout fund, prompting Premier Iveta Radicova to call for more talks. The leaders of the four governing parties in the euro region’s second-poorest member will meet again today to discuss how to proceed with the vote scheduled for a parliamentary session starting four hours later, according to Radicova. “The euro is still a major point of concern for global markets,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “We’ll still have to deal with a number of issues which are yet to be resolved. It’s hard to imagine that over the next month that all these will be resolved adequately.” Slovakia is the only country in the euro area that hasn’t ratified the financial rescue measure. Malta’s parliament approved expanded powers for Europe’s temporary rescue fund in a unanimous vote late yesterday. Fed Minutes Demand for the dollar was limited before minutes of the Fed’s September meeting are released tomorrow. The central bank said last month it will buy $400 billion of bonds with maturities of six to 30 years through June while selling an equal amount of debt maturing in three years or less under a program that has been dubbed Operation Twist. The Fed will also reinvest maturing mortgage debt into mortgage-backed securities, policy makers said. The Fed “will continue to closely monitor economic developments and is prepared to take further action as appropriate to promote a stronger economic recovery in a context of price stability,” Chairman Ben S. Bernanke said on Oct. 4 in testimony to Congress’s Joint Economic Committee in Washington. “The general attitude from the policy makers of the Fed is definitely not supportive for the U.S. dollar,” RBS’s Gibbs said. The dollar has lost 1 percent so far this year, the third- worst performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. U.K. Output The pound weakened against 14 of its 16 major counterparts before reports that may add to signs the U.K. recovery is struggling to build momentum. Industrial production fell 0.2 percent in August after dropping 0.2 percent from the previous month, the Office for National Statistics will say today according to economists surveyed by Bloomberg News. Factory output probably dropped 0.2 percent in the same period, another survey showed. “It appears that the pound is catching onto the coattails of a firmer euro rather than benefiting from a domestically led improvement in sentiment,” Mitul Kotecha, head of global currency strategy in Hong Kong at Credit Agricole CIB, wrote in a report today. “U.K. data releases today including manufacturing and industrial production may take some of the shine off” the pound. The pound fell 0.3 percent to $1.5621. The Malaysian ringgit strengthened for a sixth day after data today that showed August industrial output grew by 3 percent from a year earlier after contracting a revised 0.5 percent in July. Economists predicted a 0.4 percent increase, according to the median forecast in a Bloomberg survey. The ringgit rose to 3.1200 per dollar from 3.1266 yesterday. The currency earlier touched 3.1050, the strongest since Sept. 19, and is set for the longest winning streak since April. To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net

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