The euro was within one U.S. cent of a six-week high versus the dollar as European leaders prepared to meet tomorrow to complete a solution to the region’s debt crisis. Japan’s yen weakened against most of its major peers as European stocks approached an 11-week high. German Chancellor Angela Merkel and fellow EU leaders will return to Brussels tomorrow for a second summit in four days to discuss Europe’s bailout fund. New Zealand’s currency fell against all major peers after a report showed slowing inflation. The pound fell after Bank of England Governor Mervyn King said policy makers saw “real risks” of slowing inflation. “The market is in a wait-and-see mode until tomorrow’s summit,” said Chris Walker, a currency strategist at UBS AG in London. “People don’t want to be short the euro because if we do have a positive surprise tomorrow then it may rally.” A short position is a bet that an asset will fall. The euro was little changed at $1.3932 at 11:00 a.m. London time, after rising to $1.3957 yesterday, the strongest since Sept. 8. The shared European currency traded at 106.03 yen from 106.00 yesterday. The yen was little changed at 76.16 per dollar. The Stoxx Europe 600 Index was little changed after advancing 3.8 percent in the past two days. European leaders are seeking an agreement on bolstering the region’s rescue fund, recapitalizing banks and providing debt relief to Greece to avoid contagion spreading to Italy and Spain. Greek Losses Italian and Spanish 10-year government bonds were little changed amid speculation that their lenders will bear the brunt of a 100 billion-euro plan to recapitalize European banks. Financial companies, represented by the Washington-based Institute of International Finance, proposed a loss of 40 percent on Greek debt, said a person briefed on the matter who declined to be identified because the talks are confidential. Luxembourg’s Jean-Claude Juncker, who leads the group of euro- area finance ministers, said yesterday talks on private-sector involvement in a second aid package for Greece are focusing on losses of 50 percent to 60 percent. There are limits “to what could be considered as voluntary to the investor base and to broader market participants,” Charles Dallara, managing director of the Institute of International Finance, an industry group that’s taking part in the Greek debt talk, said in an e-mailed statement yesterday. Kiwi Falls “Europe’s debt crisis will take five-to-10 years to resolve, so even if something comes out of tomorrow’s summit, it doesn’t mean all the problems will disappear all at once,” said Daisuke Karakama, a market economist in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan’s third-biggest listed bank. “I’m bearish on the euro.” New Zealand’s dollar weakened against all 16 of its major counterparts. The kiwi declined 0.7 percent to 80.17 U.S. cents, snapping three days of gains. Consumer prices in the nation increased 0.4 percent in the third quarter from the previous three months, when they rose 1 percent, a report showed today. The data fueled speculation the central bank will signal a willingness to keep its benchmark interest rate at a record low. “The kiwi is performing badly today because of the inflation data and the risk of a revision of the central bank’s rate path,” UBS’s Walker said. Pound Falls The pound fell 0.1 percent to $1.5989 and 87.11 pence per euro. The nation’s central bank added 75 billion pounds to its asset-purchase program this month to aid the economy. “Any monetary policy easing is going to have the effect of expanding demand, spending, output and ultimately inflation,” King told U.K. lawmakers at a parliamentary hearing in London today. “When we undertook the next round of asset purchases, we did it because we thought there were real risks ahead of inflation falling below the target and we wanted to offset that.” Switzerland’s franc strengthened against all but one of its 16 major peers, advancing most against the kiwi and South Africa’s rand. It appreciated 0.2 percent against the euro to 1.2243. The Swiss National Bank expects the currency to weaken gradually on its own, although policy makers remain “ready to take further steps” if the economic growth outlook or deflationary pressure were to require it, SNB President Philipp Hildebrand was quoted as saying in an interview published today in Rzeczpospolita newspaper. The SNB remains ready to defend its 1.20 per euro cap on the franc with “full determination,” Hildebrand said, according to the newspaper’s Rp.pl website. The dollar has advanced 2.5 percent in the past six months, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The euro fell 2.6 percent over the same period, the yen gained 11 percent and the Swiss franc rose 2.8 percent, the indexes show. To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net. To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.

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