Euro Gains Against Dollar Amid Signs Economy Is Recovering

Oct. 8 (Bloomberg) -- The euro gained against the dollar before a report forecast to show German industrial output rose for a second month, boosting demand for higher-yielding assets.

The U.S. currency weakened against 15 of its 16 most-traded counterparts as Asian stocks advanced and on expectations the European Central Bank today will refrain from lowering interest rates amid signs the global economy is recovering. The Australian dollar jumped to a 14-month high after employment unexpectedly increased.

“The global economy is rebounding,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “That’s what the equity market is telling us and commodity markets are telling us. On that basis, I’m bullish on the euro.”

The euro traded at $1.4729 at 9:51 a.m. in Tokyo from $1.4691 in New York yesterday. The euro was at 130.13 yen from 130.18 yen. The yen was at 88.36 per dollar from 88.61. Yesterday it rose to as high as 88.01, the strongest level in more than eight months.

The MSCI Asia Pacific Index of regional shares rose 0.8 percent. The Standard & Poor’s 500 Index increased 0.3 percent in New York yesterday, while gold climbed to a record for the second straight day.

Economists in a Bloomberg News survey forecast German industrial output expanded 1.8 percent in August following a 0.9 percent drop in July. The Economy Ministry in Berlin is set to report the data today.

‘Worst is Over’

“People believe that the worst is over, which makes sense,” said Phil Burke, chief dealer for foreign-exchange spot trading at JPMorgan Securities in Sydney. “Overall, the dollar is still in a mid-term downtrend.”

The ECB will hold its main refinancing rate at a record low of 1 percent, and the Bank of England will keep its main rate at an all-time low of 0.5 percent at its meeting today, according to Bloomberg surveys.

The Federal Reserve will start raising its benchmark rate in the third quarter of 2010, according to analysts’ forecasts compiled by Bloomberg.

Australia’s dollar rose as much as 1.2 percent to 90.16 U.S. cents, the most since August 2008, from 89.12 cents yesterday in New York. The number of people employed rose 40,600 from August, the statistics bureau said in Sydney today. The median estimate of 20 economists surveyed by Bloomberg was for a decline of 10,000. The jobless rate fell to 5.7 percent from 5.8 percent.

New Zealand’s dollar fetched 74.01 U.S. cents from 73.64 yesterday. Earlier it touched 74.21 cents, the strongest since July 2008. New Zealand Finance Minister Bill English said he’s “uncomfortable” with the level of its currency.

“Generally when we’ve had a recession, a low dollar has helped us kick-start out of that recession,” English said in an interview in London late yesterday. “That’s clearly not going to be the case this time.”

New Zealand is being “bundled” with Australia by investors when its economy has not performed as well, exacerbating the currency’s strength, he said.