The euro was poised for its first weekly gain in a month versus the dollar as traders increased bets the European Central Bank will tighten monetary policy and Greece progressed in staving off a default. The euro headed for a weekly advance against 12 of its 16 major peers after Greek Prime Minister George Papandreou won approval to implement an austerity plan needed to keep aid flowing to his nation. The dollar was set to rise for a second week versus the yen before a report forecast to show U.S. consumer confidence was stronger than previously reported. The New Zealand dollar weakened on dimmer prospects for exports after a Chinese manufacturing index fell. “An interest-rate hike next week is pretty much a done deal for the ECB,” said Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington. “The yield differential will continue to provide support for the euro.” The euro was at $1.4517 as of 6:37 a.m. in London from $1.4502 in New York yesterday, set for a 2.3 percent weekly advance. The currency climbed to 117.16 yen from 116.84 yen. The dollar rose to 80.71 yen from 80.56 yen. New Zealand’s currency slid 0.3 percent to 82.65 U.S. cents. Europe’s central bank will add 71 additional basis points to its benchmark interest rate in the next 12 months, a Credit Suisse Group AG index based on swaps showed yesterday. That compares with 46 basis points on June 29. ‘Strong Vigilance’ ECB President Jean-Claude Trichet reiterated yesterday that policy makers are in a state of “strong vigilance” against inflation, highlighting chances of a rate increase at their meeting on July 7. The central bank raised its key rate in April for the first time in almost three years, lifting it by a quarter point to 1.25 percent. Papandreou won a vote to implement a 78 billion-euro ($113 billion) package of tax increases and asset sales, a condition of receiving further aid. The premier is seeking an “acceleration of the absorption” of planned aid funds in order to help the Greek economy exit from recession, an e-mailed statement of a letter he wrote yesterday to European Commission President Jose Manuel Barroso showed. The dollar halted a two-day slide versus the yen before today’s release of U.S. consumer confidence data for June. The Thomson Reuters/University of Michigan index of consumer sentiment was at 72 last month compared with a preliminary reading of 71.8, according to the median estimate of economists in a Bloomberg News survey. Slowdown ‘Temporary’ “I’m bullish on the dollar toward the year-end,” said Kengo Suzuki, manager of the foreign bond department in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest listed bank. “The U.S. economic slowdown is temporary.” The so-called kiwi fell for the first time in four days versus the dollar after data showed Chinese manufacturing expanded in June by less than economists had estimated, sapping demand for higher-yielding assets. “The China numbers were a bit weaker than expected and that fits with the trend we’ve seen in data out of Asia recently,” said Todd Elmer, head of Group of 10 currency strategy for Asia ex-Japan at Citigroup Inc. in Singapore. “This worsening in the outlook is a pretty clear negative signal for risky assets and risky currencies.” Tankan Drop The yen was headed for a weekly decline against 15 of its 16 most-traded counterparts on prospects the Bank of Japan will lag behind its counterparts in raising interest rates as it struggles to lift the economy out of recession. The quarterly Tankan index of sentiment at large manufacturers fell to minus 9 in June from 6 in March, the BOJ said in Tokyo today. The median estimate of economists surveyed by Bloomberg News was for a reading of minus 7. A negative number means pessimists outnumber optimists. “The bias is for the yen to fall from the perspective of monetary policy,” said Koji Fukaya, chief currency strategist at Credit Suisse Group AG in Tokyo. “Policy in Japan should be accommodative.” Ten-year Treasuries yielded 2.02 percentage points more than similar-maturity Japanese debt yesterday, the most since May 18. Once improvement in the U.S. economy becomes clear, U.S. Treasury yields will rise, helping weaken the yen, Fukaya said. To contact the reporter on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net. To contact the editors responsible for this story: Rocky Swift at rswift5@bloomberg.net

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