The franc rose against all of its major counterparts while the euro dropped against the dollar on signs European economies are slowing as policy makers struggle to stem the sovereign-debt crisis. The Swiss currency rallied as European manufacturing contracted in August more than initially estimated and the Swiss economy grew the least in two years, spurring refuge demand. The krona was the worst performer among the 16 most-traded currencies tracked by Bloomberg after an index of Swedish manufacturing fell more than economists forecast. The euro extended its decline after a Spanish debt auction missed its maximum target. “We’re certainly seeing some euro selling pressure,” said Lauren Rosborough, a senior strategist at Westpac Banking Corp. in London. “The weak PMI data is a confirmation to some extent of slowing growth in the region. When things turn bad, the Swissie tends to benefit.” The franc appreciated 1.6 percent to 1.1403 per euro at 7:12 a.m. in New York, from 1.1586 yesterday. The Swiss currency advanced 0.9 percent to 79.86 centimes per dollar, from 80.60. The euro fell 0.6 percent to $1.4281 after touching $1.4263, the lowest level since Aug. 19, in a third day of decline. The yen slid 0.5 percent to 77.05 per dollar. Europe’s economy is cooling as euro-area governments cut spending to reduce their budget deficits amid signs the region’s debt crisis is worsening, reducing the willingness of consumers to spend. U.S. Jobless Claims The dollar rose versus the yen before a Labor Department report forecast to show America’s initial claims for unemployment insurance payments dropped in the week ended Aug. 27. The median forecast of 46 economists in a Bloomberg News survey was for a decrease to 410,000 from 417,000. A report from the Institute for Supply Management is forecast to show its U.S. manufacturing index fell to 48.5 last month from 50.9 in July. The dividing line between expansion and contraction is 50, a level that the gauge last fell below in July 2009. Sweden’s currency dropped after a manufacturing index, based on responses from about 200 purchasing managers, fell to 48.7 in August from 50.1 in the prior month. Analysts expected 49.8, according to a Bloomberg News survey. The krona depreciated 0.6 percent to 6.3844 versus the U.S. dollar. The currency slid 1.5 percent to 7.9883 against the Swiss franc. European Manufacturing A European manufacturing gauge based on a survey of purchasing managers in the 17-nation euro region fell to 49 in August from 50.4 in the prior month, London-based Markit Economics said today. It was the weakest reading in two years and below an initial estimate of 49.7 published Aug. 23. A reading below 50 indicates contraction. Economic growth in Germany, the euro region’s largest economy, slowed in the second quarter as household spending decreased. Germany’s gross domestic product expanded 0.1 percent in the second quarter, down from 1.3 percent in the first three months of the year, the nation’s Federal Statistics Office said today, confirming its initial Aug. 16 estimate. Switzerland’s gross domestic product rose 0.4 percent in the second quarter, the State Secretariat for Economic Affairs said today. That’s in line with the median forecast of 18 economists in a Bloomberg News survey. Spanish Bond Auction Spanish bonds fell today as the nation sold 3.62 billion euros ($5.2 billion) of five-year securities. The Treasury had set a maximum target of 4 billion euros for the sale. Demand for the securities was 1.76 times the amount sold, down from 2.85 in July. The European Central Bank has been buying Spanish securities to limit debt turmoil, which forced Ireland, Greece and Portugal to seek rescues. “The euro-zone debt crisis means flows are still fundamentally supportive of the Swissie, which means it has potential for further upside,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The euro-zone debt crisis is not going to disappear anytime soon. Ultimately the debt crisis will push the euro weaker against the dollar.” Gains in the franc come after the Swiss government pledged yesterday to spend 870 million francs ($1.1 billion) as part of an economic stimulus package to help counter the impact of the currency’s strength. Economy Minister Johann Schneider-Ammann said the nation would have to learn to live with a strong franc, eroding concern the government may intervene to weaken it. To contact the reporter on this story: Garth Theunissen in London gtheunissen@bloomberg.net To contact the editor responsible for this story: Keith Campbell at k.campbell@bloomberg.net

Source