The euro rose for the first time in three weeks against the dollar and touched a two-week high after European leaders agreed to a new bailout for Greece and expanded the role of the region’s rescue fund. The Swiss franc dropped this week against all of its 16 most-traded counterparts tracked by Bloomberg on reduced safety demand as leaders agreed to guarantee Greek bonds in money market operations if a bailout agreement triggers a default. The dollar pared its third weekly drop versus the yen before House Speaker John Boehner withdrew late yesterday from negotiations with the White House on a broad deficit-reduction package. “The net-positive performance on the euro is clearly linked to the outcome of the summit and the fact that we’ve seen a reversal in euro peripheral credit markets,” said Ray Attrill, a senior currency strategist at BNP Paribas SA in New York. “Everybody’s expectations in terms of the outcome of the summit were exceeded, and it’s put the onus squarely back on U.S. policy makers.” The euro advanced 1.4 percent this week to $1.4360, from $1.4157 on July 15. The shared currency reached $1.4439 yesterday, the highest level since July 6. The euro gained 0.7 percent to 112.77 yen, from 112.02. The greenback depreciated 0.8 percent to 78.54 yen, from 79.13. Canada’s dollar pared its weekly gain versus the greenback after a government report showed yesterday that the inflation rate slowed in June more than economists forecast. Bank of Canada The loonie rallied to a three-year high on July 21, two days after the Bank of Canada said borrowing costs will rise, omitting the word “eventually,” which had appeared in previous statements. The bank also raised its forecast for inflation. The Canadian dollar gained 0.6 percent to 94.80 cents versus the greenback after touching 94.23 cents two days ago, the strongest level since November 2007. Norway’s krone and Sweden’s krona were the best performers against the dollar among the most-traded currencies on speculation the European rescue will spur the Scandinavian nations’ economic growth. The krone climbed 2.5 percent to 5.4144 versus the dollar, while Sweden’s currency gained 2.4 percent to 6.3320. Futures on crude oil, Norway’s biggest export, rallied 2.7 percent to $99.87 a barrel. Norway’s currency pared its weekly gain yesterday after a bomb blast in Oslo killed seven people and shattered windows at the office of Prime Minister Jens Stoltenberg, who was reported safe. In addition, a gunman shot several people on an island near the Norwegian capital. Weaker Franc The Swiss franc, regarded as a haven in times of financial turmoil, declined 1.9 percent to 1.1762 against the euro after rallying on July 18 to 1.1374, the strongest level since the European’s currency’s 1999 debut. Euro-area leaders announced on July 21 after eight hours of talks in Brussels 159 billion euro ($229 billion) in new aid for Greece, with bondholders agreeing to contribute to the package. They also expanded the role of the 440-billion euro rescue fund to buy debt across distressed nations, assist troubled banks and offer credit lines. “Right now you have a bit of relief that they were able to come up with a viable plan, but it doesn’t address some of the longer-term structural issues,” said Carl Forcheski, a director on the corporate currency sales desk at Societe Generale SA in New York. Greece would be cut to “RD,” or “restricted default,” if the plan is implemented, Fitch said yesterday in an e-mailed statement. The ratings company lowered Greece by three levels to CCC on July 13. Debt Holder Loss “The proposed debt exchange implies a 20 percent net present value loss for banks and other holders of Greek government debt,” the Fitch statement said. “An exchange that offers new securities with terms that are worse than the original contractual terms of the existing debt and where the sovereign is subject to financial distress constitutes a default event under Fitch’s ‘coercive debt-exchange criteria.’” Greek two-year notes rallied on the summit agreement, pushing the yield down 5.44 percentage points to 27.63 percent. It was the biggest decrease since May 2010, when European finance ministers announced a $1 trillion loan packaged for countries struggling with debt. IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, dropped 1.2 percent to 74.245 after falling on July 21 to 73.889, the lowest level since June 9. U.S. Budget Debate President Barack Obama and Boehner have confronted strife within their ranks and dwindling time to avert a default as they pressed for a plan to boost the nation’s $14.3 trillion debt limit. The two leaders had discussed cutting spending by trillions of dollars and overhauling the tax code. Boehner said he will instead talk with Senate leaders on a way to avoid a U.S. default. A bipartisan group of senators called the Gang of Six outlined a $3.7 trillion deficit- reduction plan, which Obama embraced this week. Some Republicans have endorsed it or signaled openness to considering it. “What we know now is that we’ve gotten what we’re going to get from Europe, and the NFL owners have just come to an agreement of a 10-year deal,” said Robert Sinche, global head of currency strategy at Royal Bank of Scotland Group Plc in Stamford, Connecticut. “The question is can Congress do the same. What’s in the market is that the debt ceiling will be rising and there is uncertainty of the magnitude of a deficit reduction.” To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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