The euro rose to three-week highs against the dollar and yen as European Commission President Jose Barroso called for a “coordinated approach” to recapitalize the region’s banks. The 17-nation currency extended gains after policy makers in Slovakia, the only nation yet to approve a retooled bailout fund, reached an agreement on another vote to ratify the plan. New Zealand’s dollar rose the most in two months against the dollar as stocks and commodities advanced, buoying higher- yielding currencies. The dollar weakened against the majority of its most-traded counterparts before the release of minutes from the most recent Federal Open Market Committee meeting. “The market has priced in a lot of the good news from the constructive proposals,” said Aroop Chatterjee, a currency strategist at Barclays Plc in New York. “The question remains whether actions will meet expectations. If the euro hovers around here, there will be less urgency from European politicians.” The euro strengthened 1.2 percent to $1.3802 at 12:10 p.m. New York time, after rising to $1.3817, the strongest level since Sept. 16. The 17-nation currency gained 2.2 percent to 106.80 yen after reaching 107.02 yen, the most since Sept. 9. The dollar rose 0.9 percent to 77.44 yen, after touching the highest level since Sept. 12. Capital Buffers Barroso urged a “coordinated approach” to deliver a “significantly higher capital ratio of highest quality capital” for banks, while offering government funds only as a last resort. Banks that require aid would be barred from paying dividends or bonuses. Banks may be required to maintain a 9 percent capital buffer to absorb sovereign risks, up from the 5 percent core capital level used in July’s stress tests, according to a person familiar with discussions at the European Union’s top banking regulator. “We’ve had a lot of talk, but then again we’ve had a lot of talk from Europe in the last 18 months,” said Tom Fitzpatrick, chief technical analyst at Citigroup Inc. in New York. “We’re almost in an environment where no news becomes good news.” Slovak parties reached an agreement to approve Europe’s enhanced bailout fund, paving the way for a vote this week. Stocks Gain The Standard & Poor’s 500 Index climbed 1.3 percent. Government bonds declined, with Germany’s 10-year bund falling for a sixth straight day, pushing the yield on the securities up seven basis points to the highest level since Sept. 1. The U.S. Treasury 30-year bond yield climbed nine basis points to 3.19 percent, the highest since Sept. 21. The Dollar Index, which tracks the U.S. currency against those of six U.S. trading partners, slid 0.8 percent to 76.969. It earlier reached 76.796, the lowest since Sept. 21. The Federal Reserve releases the minutes of its Sept. 20-21 meeting at 2 p.m. New York time. At that meeting Fed policy makers kept the federal funds target rate for overnight interbank loans in a range of zero to 0.25 percent and announced plans, known as Operation Twist, to buy $400 billion of bonds with maturities of six to 30 years through June while selling an equal amount of debt maturing in three years or less. “The Fed minutes will be interesting as there is a divergence of views in the market about how weak the U.S. economy is,” said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. “There is a view that there is a more than 50 percent chance of recession and the Fed would be easing policy before it’s too late, not our view, and the minutes will shed light on how much the Fed wants to ease further from now.” Aussie Rises Australia’s dollar rallied 2.1 percent to $1.0159 U.S., and gained 3 percent to 78.59 yen. New Zealand’s dollar strengthened 2.1 percent to 79.64 U.S. cents, and appreciated 3.1 percent to 61.61 yen. The European Commission recommended Serbia win candidate status and promised European Union entry talks would start once the Balkan state makes “further progress” in ties with the breakaway province of Kosovo. Serbia will join other former Yugoslav republics in moving toward the world’s largest trading bloc. Serbia’s dinar traded at 100.50 against the euro, up from the central bank’s official mid-rate of 101.2273 yesterday. The U.S. Senate passed legislation yesterday punishing China for its undervalued currency, increasing concern that trade between the two nations will be hurt. U.S. lawmakers voted 63-35 to approve a measure that would let companies seek duties to compensate for a weak Chinese yuan. Governments that undervalue their currencies and don’t take corrective action would face penalties, including increased dumping duties and a ban on federal procurement in the U.S. To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net; Keith Jenkins in London at kjenkins3@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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