The euro rose as a report that the European Central Bank is exchanging Greek bonds for new securities bolstered speculation the nation will get its second bailout. The dollar erased gains against a majority of its most- traded counterparts after data showed manufacturing in the Philadelphia area expanded by the fastest in four months and initial jobless claims fell to the lowest in four years. Sweden’s krona dropped to a two-week low after the central bank cut interest rates. The pound rose against the dollar as consumer confidence improved in January. “The bond swap implies that the second bailout is likely to happen,� said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. “The narrowing of spreads in the bond market are precipitating a sense that the second bailout is more likely to happen by March 20 and the euro is benefiting.� The euro rose 0.5 percent to $1.3130 at 5 p.m. in New York after sliding to $1.2974, the lowest level since Jan. 25. The common currency rose 1.1 percent to 103.65 yen after touching 103.84 yen, the highest level since Dec. 12. The dollar appreciated 0.7 percent to 78.94 yen after hitting 78.97 yen, the strongest level since Nov. 1. Bond Swap The ECB is swapping its 50 billion-euro ($65 billion) Greek government bond holdings for new Greek bonds, three euro-area officials said. The swap may be completed by Feb. 20 and could pave the way for a private sector bond swap that aims to slice about 100 billion euros off Greece’s debt. An ECB spokesman declined to comment on the report. The Australian dollar rose 0.5 percent to $1.0755 and Brazil’s real gained 0.7 percent to 1.7164 per dollar as the Standard & Poor’s 500 Index erased losses to trade 1.1 percent stronger. Australia’s currency was also supported as the nation’s payrolls increased by the most since November 2010. U.S. data today showed improvement in the labor and housing markets as well as consumer sentiment. First-time jobless claims unexpectedly declined 13,000 last week to 348,000, the fewest since March 2008, Labor Department figures showed. The Federal Reserve Bank of Philadelphia’s general economic index increased to 10.2, higher than projected, from 7.3 last month. ‘Biggest Headline’ “There is so much back and forth on this Greek situation, yet U.S. stocks have reacted quite well today to the data,� said Carl Forcheski, a director on the corporate-currency sales desk at Societe Generale SA in New York. “The biggest headline was the initial claims data and it’s showing some good progress.� Norway’s krone and Canada’s dollar advanced as crude oil futures reached a five-week high in New York. The krone rose 0.9 percent to 5.7291 per dollar and the Canadian currency gained 0.3 percent to 99.66 cents per dollar. Oil for March delivery gained 0.5 percent to $102.39 per barrel in New York after touching $102.69, the highest since Jan. 12. Sterling rose 0.2 percent to 83.13 pence per euro and gained 0.7 percent to $1.5800. Nationwide Building Society said its U.K. sentiment index climbed to 47 in January from 38 the previous month. A gauge of consumers’ outlook for the economy jumped by 14 points, the Swindon, England-based customer-owned lender said. The krona fluctuated after earlier weakening as the Riksbank lowered its forecast for future interest rates, citing a drag on exports from Europe’s debt crisis. The krona was little changed at 6.7227 per dollar after touching 6.7918, the weakest since Feb. 1. It slipped 0.5 percent to 8.8273 per euro. To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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