Euro Strengthens

The euro gained one cent against the dollar and climbed to the highest in almost a month versus the U.K. pound after German business confidence unexpectedly rose., Bloomberg 5/21/2008 6:38:20 AM

The euro also gained versus the Japanese yen after the Munich-based Ifo institute said its business-climate index rose in May. The yen advanced to the highest in more than a week against the dollar as a decline in European and Asian stocks prompted investors to pare holdings of higher-yielding assets funded in the Japanese currency. Australia's dollar reached a 24- year high against the U.S. currency as crude oil rose above $130 a barrel.

The euro climbed to $1.5755 as of 8:43 a.m. in New York, from $1.5646 yesterday. It touched 80.225 pence per pound, the highest since April 24, from 79.490 yesterday, and rose to 162.82 yen, from 162.22. The yen climbed to 103.33 per dollar, from 103.68.

The Ifo institute said its index, based on a survey of 7,000 executives, rose to 103.5, from 102.4 in April. Economists predicted a decline to 102, according to the median of 44 forecasts in a Bloomberg News survey. Germany is the biggest economy in the euro region.

The yield advantage of a two-year German Bund over a comparable Treasury note rose 3 basis points, or 0.03 percentage point, to 1.72 percent. The spread was 1.34 percent on May 13.

The European Central Bank shelved a planned interest-rate increase last year to assess the economic impact of the credit squeeze. It has left its benchmark rate at a 6 1/2-year high of 4 percent since June. ECB President Jean-Claude Trichet said last month there is ``strong short-term upward pressure on inflation' and the economy has ``sound'' fundamentals.

The yen also rose as the MSCI Asia Pacific Index tumbled 1 percent amid concern soaring oil prices and the collapse of the subprime-mortgage market will hamper global economic growth.

Euro Strengthens