The euro was 0.3 percent from a one- week low versus the yen as concern Europe’s debt crisis is spreading and China’s decision to raise interest rates damped demand for higher-yielding assets. The euro traded near the lowest level in a week against the Swiss franc after analysts said Ireland’s credit rating may be cut to junk by Moody’s Investors Service following Portugal’s loss of its investment-grade rating. The Australian dollar rose after a government report showed employers added more jobs than economists had estimated. Thailand’s baht advanced after incoming Prime Minister Yingluck Shinawatra said her government intended to let the currency strengthen. “I think this contagion, Europe periphery stuff is actually really important, and that will continue to weigh on the euro,” said Matthew Brady, executive director for foreign exchange at JPMorgan Chase & Co. in Sydney. “I do prefer to sell rallies for the euro.” The euro traded at 115.91 yen as of 12:20 p.m. in Tokyo from 115.86 in New York yesterday, when it touched 115.55, the weakest level since June 28. The 17-nation currency fetched 1.2033 Swiss francs from 1.2018 francs after yesterday falling to 1.1967, the lowest since June 29. The euro was at $1.4338 from $1.4319. Yesterday, it touched $1.4286, the lowest level since June 28. The dollar bought 80.87 yen from 80.91. Temporary Default Greece’s efforts to emerge from its sovereign-debt crisis could include a temporary default as part of a longer-term recovery plan, said Charles Dallara, managing director of the Institute of International Finance. In an interview with Bloomberg Television in Paris yesterday, Dallara said market participants shouldn’t be “fixated” on comments from any one rating company. China is raising benchmark interest rates for the third time this year after inflation accelerated to the fastest pace since July 2008. The one-year lending rate will increase to 6.56 percent from 6.31 percent today, the People’s Bank of China said on its website yesterday. The one-year deposit rate rises to 3.5 percent from 3.25 percent. The euro snapped yesterday’s loss against the dollar and yen after Moody’s said it differentiates “significantly” among European periphery countries, suggesting it may not imminently cut Ireland’s rating to junk in line with Portugal and Greece. The European Central Bank will increase its main refinancing rate to 1.50 percent today from 1.25 percent, according to all 55 economists in a Bloomberg News survey. The central bank may increase borrowing costs further in the fourth quarter, according to a separate survey. Trichet’s Comments “The key for the ECB tonight will probably be the accompanying press conference” by ECB President Jean-Claude Trichet, said Mike Burrowes, currency strategist at Bank of New Zealand Ltd. in Wellington. “If he maintains that extremely vigilant language on the inflation front, that will provide a boost to the euro.” Bank of England Governor Mervyn King’s monetary policy may diverge further from the rest of Europe today as officials keep record-low interest rates to aid the recovery and guard against threats from the Greek crisis. The BOE will hold the benchmark rate at 0.5 percent, according to all 51 economists in a Bloomberg News survey. ECB, FED Swaps traders are betting the ECB will raise its target rate by 76.7 basis points over the next 12 months, a Credit Suisse AG index showed. That’s up from 45.8 basis points a week earlier. Another index forecasts 21 basis points of tightening by the Federal Reserve for the same period. U.S. payrolls climbed by 100,000 workers last month after a 54,000 increase in May that was the smallest in eight months, according to the median forecast of economists surveyed by Bloomberg News ahead of Labor Department data due tomorrow. Economists predict the jobless rate held at 9.1 percent in June, unchanged from its highest level so far this year. The Australian dollar advanced against all of its 16 major counterparts after the government today reported the number of people employed rose by 23,400, led by a jump in full-time jobs. That was higher than the median estimate for a 15,000 increase in a Bloomberg News survey of economists. The jobless rate held at 4.9 percent. ‘Extremely Resilient’ “There’s overall a fairly tight labor market and it keeps the policy direction of the RBA still pointing toward hikes,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “The currency’s been extremely resilient to global factors and is bouncing because the data shows the economy is fairly well balanced.” Australia’s dollar rose to $1.0755 from $1.0701. It gained to 86.94 yen from 86.58 yen. Yingluck, head of the Pheu Thai party, said Thailand will allow the baht to appreciate against the dollar to help curb imported inflation, the Wall Street Journal reported today. “Yingluck’s remarks were a primary driver for the baht,” said Shigehisa Shiroki, chief trader on the Asian and emerging- markets team at Mizuho Corporate Bank Ltd. in Tokyo. “The rate- hike speculation is also supportive. The baht will remain under appreciation pressure in the short term.” The baht climbed 0.4 percent to 30.33 per dollar. It reached 30.32 earlier, the strongest level since June 8. To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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