The euro advanced for a second straight day versus the dollar and yen after news reports said Germany and France are approaching a deal to boost the size of Europe’s rescue fund. The dollar, yen and Swiss franc fell versus most of their major counterparts on reduced refuge demand. The 17-nation currency rose after the Guardian newspaper reported yesterday that Germany and France have agreed before a summit this weekend to increase the 440-billion euro ($609 billion) European Financial Stability Facility to 2 trillion euros. “The euro is back on the highs,” said Ray Attrill, a senior currency strategist at BNP Paribas SA in New York. “The market is continuing to travel optimistically. For the moment, it’s giving the benefit of the doubt to euro-zone policy makers that they’re going to come up with something that is at least halfway credible.” The euro appreciated 0.7 percent to $1.3847 at 8:54 a.m. in New York, after rising 0.1 percent yesterday. The currency rose 0.6 percent to 106.28 yen and advanced 0.5 percent to 1.2432 francs. The yen was little changed at 76.82 per dollar. The Stoxx Europe 600 Index rallied 0.8 percent, while futures on the Standard & Poor’s 500 Index expiring in December were little changed. Sterling rose for the first time in three days, advancing 0.7 percent to $1.5826, on speculation a resolution to Europe’s debt crisis will help boost Britain’s economy. Bank of England Bank of England policy makers voted unanimously to expand the size of their asset-purchase program this month, according to minutes of their Oct. 6 meeting released today. Strains related to Europe’s debt crisis created a “compelling” case to add to stimulus, according to the minutes. The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, dropped 0.7 percent to 76.623. The U.S. consumer-price index climbed 0.3 percent from the prior month, in line with the median projection of economists surveyed by Bloomberg News, a report from the Labor Department showed today in Washington. Excluding volatile food and fuel costs, the so-called core rose 0.1 percent, less than forecast and the smallest gain since March. Builders began work on 658,000 houses at an annual rate, up 15 percent from August and the most since April 2010, Commerce Department figures showed today in Washington. Rescue Fund The euro advanced as Financial Times Deutschland reported without saying where it obtained the information that German Finance Minister Wolfgang Schaeuble told lawmakers in Berlin that the firepower of the EFSF may be increased to a maximum of 1 trillion euros through an insurance model. Germany and France also support recapitalization of the region’s banks, the Guardian reported. A spokesman for German Chancellor Angela Merkel declined to comment. Merkel said yesterday the EU summit will mark an important step, though not the final one, in solving the debt crisis. “The euro is supported in part because what European leaders are doing is right, though progress has been slow,” said Kengo Suzuki, a bond-department manager at Mizuho Securities Co. in Tokyo. The currency fell earlier after Moody’s Investors Service cut Spain’s credit ranking yesterday by two levels to A1 from Aa2. The company cited the “continued vulnerability of Spain to market stress” that is driving up the cost of borrowing, as well as weaker growth prospects. Nikkei Report Japan’s currency pared its gain yesterday after the Nikkei newspaper reported that the government and central bank will form a team of senior officials to address the strong yen. The opposition Liberal Democratic Party urged the government this month to step up currency-market intervention to counter the yen’s appreciation. The yen depreciated 0.3 percent today, according to Bloomberg Correlation-Weighted Indexes, a gauge of 10 developed- nation currencies. It has risen 11 percent over the past six months, the indexes show. Japan’s currency rallied to a post-World War II high of 75.95 against the dollar in August, making the nation’s exports more expensive. It gained even after the government intervened in the currency market for the third time in the past year, selling the yen in an effort to curb its appreciation. South Korea’s won rose to a four-week high after President Lee Myung Bak and Japanese Prime Minister Yoshihiko Noda agreed to increase a currency-swap accord by more than fivefold to $70 billion amid global economic uncertainty. “The move strengthens our positive relative value view towards the Korean won against most other regional currencies and should also be supportive of Korean assets in general,” Ilan Solot, an emerging-markets strategist at Brown Brothers Harriman & Co. in London, wrote in a note to clients. The won climbed 1.2 percent to 1,132.30 per dollar after touching 1,128.53, the strongest level since Sept. 19. To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Emma Charlton in London at echarlton1@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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