The euro rose against the dollar for the first time in three days as a purchasing managers’ index of manufacturing output in the region beat analysts’ estimates, adding to signs Europe’s economy is stabilizing. The greenback fell versus 14 of its 16 major peers as equities advanced, damping demand for safer assets. The yen appreciated for a fifth day against its U.S. counterpart, adding to speculation Japan’s central bank may sell the currency to stem its appreciation. Switzerland’s franc climbed to a four- month high against the euro, approaching the Swiss National Bank’s ceiling. “The surprisingly good manufacturing PMI surveys out of Europe are helping risk sentiment and the euro,� said Elizabeth Gregory, a market strategist at Swissquote Bank SA in Geneva. “Expectations are everything in this environment so any upside surprise is going to have a bigger impact.� The 17-nation currency climbed 0.4 percent to $1.3130 at 11:19 a.m. London time. The euro traded 0.1 percent higher at 99.92 yen, and the dollar weakened 0.2 percent to 76.10 yen, after reaching 76.04 yen. the least since Oct. 31. The Stoxx Europe 600 Index of shares gained 1.5 percent while futures on the Standard & Poor’s 500 Index advanced 0.7 percent. The euro reversed an earlier decline as Markit Economics said its manufacturing gauge based on a survey of purchasing managers in the euro region rose to 48.8 in January from 46.9 in December. That compares to a median estimate of 48.7 in a Bloomberg survey of economists. German Output In Germany, the output gauge reached the highest in six months, while Austria also reported an expansion, Markit said. The euro appreciated 1 percent against the dollar last month as Italian and Spanish bonds outperformed their German counterparts amid speculation policy makers are bringing the region’s debt crisis under control. European economic confidence increased in January and German unemployment dropped more than economists estimated from the previous month. The yen is the best performer among the 10 currencies tracked by the Bloomberg Correlation-Weighted Indexes in the past six months after the euro area’s debt crisis increased demand for safer assets. The yen gained 6.7 percent in the period, matching the dollar’s advance, while the euro weakened 2.2 percent. Goldman’s Prediction Japan may act if the yen approaches a new record against the dollar, according to Naohiko Baba, Goldman Sachs Group Inc.’s chief economist in Tokyo. The authorities may attempt large-scale intervention and continue so-called stealth operations for several days, he wrote in a note today. Japan refrained from selling yen in the market last month, the Ministry of Finance said yesterday on its website. Japan sold the currency on Oct. 31 when it climbed to a postwar record of 75.35 per dollar, hurting the overseas competitiveness of exporters and cutting the value of their repatriated income. The franc was little changed at 1.20459 per euro after earlier appreciating to 1.20319, the strongest since Sept. 19, two weeks after the SNB imposed a 1.20 cap on the currency. The cost to protect against a drop in the euro against the franc has increased for the past four days. Risk-reversal rates for one-month options on the currency pair had a 1.24 percentage-point premium for contracts that grant the right to sell the euro over those allowing for purchases, the most since Sept. 20. Swiss Risk The risk-reversal rate “continues to reflect a rising premium for puts over calls, seemingly indicating a looming test of wills,� Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong, wrote in a note to clients. A call option grants the buyer the right, but not the obligation, to purchase a security, while put options confer the right to sell. The Norwegian krone advanced against the euro after Norway’s manufacturing expanded in January for the first time since October. The krone strengthened 0.3 percent to 7.6503 per euro as the Fokus Bank index rose to 54.9 from 46.6 in December. It was forecast to rise to 48, according to a Bloomberg survey of analysts. A reading above 50 signals an expansion. South Korea’s won declined against all its major counterparts as exports dropped for the first time in two years and inflation decelerated. Consumer prices rose 3.4 percent in January from a year earlier, compared with 4.2 percent the month before. Exports shrank 6.6 percent, the first decline since October 2009. The won declined 0.3 percent to 1,126.35 per dollar. To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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