The dollar strengthened against the euro, paring its biggest weekly decline in six months, as investors bet the Federal Reserve will withdraw stimulus faster than the European Central Bank. The U.S. currency advanced versus most of its 16 major counterparts before American reports that economists said will show producer prices increased in June and consumer confidence improved. The euro fell for the first time in three days against the yen as a report showed industrial production in the region declined in May. The pound fell after U.K. construction contracted in May. “We still have the Fed normalizing policy, on the other hand we have the ECB which is clearly on the path of becoming more expansionary,� said Ulrich Leuchtmann, the head of currency strategy at Commerzbank AG in Frankfurt. “People are betting now on good entry levels for U.S. dollar long positions.� A long position is a bet that an asset will appreciate. The dollar appreciated 0.4 percent to $1.3050 per euro at 10:29 a.m. London time after touching $1.3207 yesterday, the weakest level since June 21. The U.S. currency has slipped 1.6 percent this week, the most since the period ended Jan. 11. It was little changed at 99.04 yen, poised for a 2.1 percent decline this week. The euro slid 0.3 percent to 129.27 yen. Currency Index The Bloomberg Dollar Index, which tracks the greenback against 10 other major currencies, rose 0.3 percent to 1,036.95 after sliding 1.4 percent yesterday. The greenback headed for a weekly slide against most of its 16 major peers after Fed Chairman Ben S. Bernanke damped speculation that the central bank would reduce its bond-buying program in a July 10 speech. St. Louis Fed President James Bullard, who has advocated an increase in asset purchases if inflation slows, speaks today. Bernanke said in response to a question after a speech in Cambridge, Massachusetts that “highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy. He is scheduled to deliver a semi-annual monetary policy report to Congress in the House of Financial Services Committee on July 17. The Fed buys $85 billion of Treasuries and mortgage debt each month as part of its quantitative-easing program to cap borrowing costs, which tends to devalue the U.S. currency. Bullard, a voting member of the Federal Open Market Committee this year, speaks in Jackson Hole, Wyoming today. Minutes of the Fed’s June 18-19 meeting released July 10 showed that he said the central bank should ‘‘signal more strongly its willingness to defend its goal of 2 percent inflation� in light of low readings on consumer-price increases. Euro-area industrial output dropped 0.3 percent in May after increasing 0.5 percent a month earlier, the European Union’s statistics office in Luxembourg said. The pound slipped 0.4 percent to $1.5129 after declining to $1.4814 on July 9, the lowest level since June 2010. To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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