The euro approached a two-week high against the yen before German reports this week that analysts say will show the region’s largest economy is gaining momentum. Germany’s producer prices rose in July, while surveys of purchasing managers in manufacturing and services industries showed activity improved this month, according to Bloomberg News surveys. The yen weakened earlier after Japan’s trade deficit widened in July. Australia’s dollar strengthened for a fourth day amid speculation minutes tomorrow of the Reserve Bank’s latest meeting will signal policy makers are in no hurry to reduce interest rates again. “We’re seeing some pretty clear signs that the euro zone has recovered from recession,� said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “This week’s European flash PMI will certainly see that recovery trend shine through.� The euro rose 0.1 percent to 130.12 yen at 8:34 a.m. in London after advancing to 130.72 on Aug. 15, the highest level since Aug. 6. The common currency was little changed at $1.3331. The yen weakened 0.1 percent to 97.61 per dollar after depreciating as much as 0.3 percent. German producer prices rose 0.2 percent in July, the first increase in six months, the Federal Statistics Office will say tomorrow, according to a Bloomberg survey. A gauge of manufacturing climbed to 51.1 this month from 50.7 in July and the services index increased to 51.7 from 51.3, an Aug. 22 report from Markit Economics will show separate survey showed. Readings above 50 indicate growth. Best Performer The euro has strengthened 5.1 percent this year, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation Weighted Indexes. The dollar rose 3.9 percent, while the yen slumped 8.9 percent. Speculators have increased bets the yen will strengthen versus the euro, according to data from the Commodity Futures Trading Commission. The difference in the number of wagers by hedge funds and other large speculators on a gain in the currency compared with those on a decline -- net longs -- was 16,057 on Aug. 13, the most since the week through June 25. Japan’s imports outpaced exports by 1.02 trillion yen in July, compared with the median estimate for a 773.5 billion yen gap, the Ministry of Finance said in Tokyo. It was the biggest deficit since January, when it was a record 1.63 trillion yen. “Japan’s external balance remains deeply in deficit and that’s obviously a yen negative,� said Callum Henderson, Singapore-based global head of currency research at Standard Chartered Plc. Dollar Index The Bloomberg U.S. Dollar Index, which tracks the currency against 10 major counterparts, was little changed at 1,022.41 after climbing 0.5 percent last week. The Federal Reserve will release the minutes of its July 30-31 meeting on Aug. 21. Investors and analysts will be looking for clues on when central bankers plan to reduce its $85 billion in monthly asset purchases. Officials will begin to reduce the central bank’s bond buying next month, according to 65 percent of economists surveyed by Bloomberg from Aug. 9-13. Australia’s dollar climbed to a three-week high as traders pared bets for further declines in the currency. Net short positions in the currency fell to 62,721 as of Aug. 13, compared with an all-time high of 76,779 a week earlier, according to the Commodity Futures Trading Commission. “It was very helpful for the Aussie that the RBA sounded more neutral in August,� Sean Callow, a senior currency strategist at Westpac Banking Corp. (WBC) in Sydney, said of the central bank’s statement earlier this month. “The timing doesn’t seem right for a rout of the Aussie dollar.� The Australian currency gained 0.2 percent to 92.06 U.S. cents after advancing to 92.33, the highest since July 29. 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: Paul Dobson at pdobson2@bloomberg.net

Source