The euro fell toward a two-week low against the dollar on speculation a European report today will show the region’s jobless rate climbed to the highest level in more than two years. The yen advanced against all 16 major currencies after Bloomberg News reported President Barack Obama is prepared to let U.S. automakers go bankrupt, spurring demand for Japan’s currency as a refuge. The yen earlier weakened after a Bank of Japan survey showed business sentiment dropped to a record low, adding to signs the recession in the world’s second-largest economy is deepening. “The economic recession is looking worse so the euro is very much a fundamentally weak currency,” said Sharada Selvanathan, a foreign-exchange strategist in Hong Kong at BNP Paribas SA, France’s largest bank. “The risk is skewed toward the downside for the euro.” The euro declined to $1.3192 as of 6:24 a.m. in London from $1.3250 yesterday in New York. It touched $1.3114 on March 30, the lowest level since March 18. The 16-nation currency dropped to 130.22 yen from 131.13 yen. The yen climbed to 98.74 per dollar from 98.96 yesterday after earlier falling to 99.47, the weakest since March 5. The U.S. currency rose to 1.1430 Swiss francs from 1.1394, and gained to $1.4285 per pound from $1.4323. Jobless Report The euro weakened against 11 of the 16 major currencies before the statistics office report that economists say will show the jobless rate climbed to 8.3 percent in February, the highest since June 2006, from 8.2 percent the previous month. The figure will be released at 11 a.m. in Luxembourg. Europe’s currency also fell as investors increased bets the European Central Bank will lower borrowing costs in coming months. The yield on the three-month Euribor interest-rate futures contract for June delivery declined to 1.25 percent from 1.255 percent yesterday, according to data compiled by Bloomberg. ECB President Jean-Claude Trichet and his colleagues will lower their key rate to 1 percent from 1.5 percent at a meeting tomorrow, according to a Bloomberg News survey. The euro will drop to $1.27 and 127 yen by June 30, according to a separate Bloomberg survey of analysts. The estimate puts a heavier weighting on more recent forecasts. The yen climbed from its lowest level in four weeks against the dollar on speculation President Obama will allow the largest U.S. carmakers to fail. Negotiated Bankruptcy Obama believes a quick, negotiated bankruptcy is the most likely way for General Motors Corp. to become competitive, people familiar with the matter said. Obama also is prepared to let Chrysler LLC go bankrupt and be sold off if it can’t form an alliance with Fiat SpA, said members of Congress who were briefed on the GM and Chrysler situation. “The news about the U.S. carmakers spurred investors to buy the yen,” said Masafumi Yamamoto, head of foreign-exchange strategy for Japan at Royal Bank of Scotland Group Plc in Tokyo and a former Bank of Japan currency trader. Prepackaged bankruptcy “is the fastest and best way to fix the problem.” The Dollar Index extended gains into a fifth quarter on speculation U.S. reports today will show the recession in the world’s largest economy is easing, restoring investor confidence in the nation’s assets. The U.S. currency may rise as the National Association of Realtors will say contracts to buy previously owned homes stabilized in February after a 7.7 percent drop in January, a Bloomberg survey shows. The Institute for Supply Management’s factory index will be at 36 in March, up from 35.8 in February, according to a separate Bloomberg survey. ‘Bottoming Out’ “The reports may indicate that the U.S. recession is bottoming out, which would be supportive of the dollar,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “The Obama administration is also carrying out various policies” to counter the financial crisis, he said. The dollar may strengthen to 99.69 yen and $1.3175 per euro today, Soma said. The Dollar Index, used by the ICE to track the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, gained 0.4 percent to 85.793. The gauge yesterday completed a fourth quarterly gain, the longest stretch of advances since 2005. Tankan Report Japan’s currency earlier weakened, following its worst quarterly loss against the dollar since 2001, after the Bank of Japan said its Tankan survey of sentiment among large manufacturers slumped to minus 58 in March from minus 24 in December. Economists forecast a drop to minus 55, according to a Bloomberg survey. “Japan seems to be taking the hit in terms of their economy a lot worse than other countries,” said Adam Carr, a senior economist in Sydney at ICAP Australia Ltd., a unit of the world’s largest interdealer broker. The Tankan survey “absolutely highlights the reason why we should be getting out of the yen.” The Japanese currency tumbled 8.4 percent against the dollar in the first quarter, the worst performance since the last three months of 2001, and weakened 3.5 percent versus the euro, the first quarterly drop since June. The dollar is likely to rally versus Asian currencies as leaders of 19 developed and emerging economies and the European Union gather in London tomorrow to search for a global approach to ending the economic crisis. A poor response to the international financial turmoil from the Group of 20 leaders may support “cautious” dollar bids, especially versus South Korea’s won, Taiwan’s dollar, Singapore’s dollar and Malaysia’s ringgit, New York-based Daniel Tenengauzer, head of currency strategy, wrote in a research note yesterday. “We are looking for some disappointment in the G-20 outcome and the U.S. equities to support a shift back into the U.S. dollar,” Tenengauzer said.

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