By Theresa Barraclough and Ron Harui Aug. 7 (Bloomberg) -- The euro headed for a fourth weekly gain against the dollar and yen before a German report that economists said will show the nation’s industrial production rose, adding to signs Europe’s recession is abating. German output rose for a second month while U.S. companies cut fewer jobs, government reports are forecast to show, reducing demand for safe-haven currencies. The dollar is set for a fifth weekly drop versus the currencies of six major U.S. trading partners, its longest stretch since March 2008. The Australian dollar is poised to rise a fourth week after the Reserve Bank of Australia said it may raise rates, spurring investors to buy higher-yielding assets. “The outlook for the global economy, including Europe, is brightening,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “The bias for the euro is up.” The euro traded at $1.4357 as of 6:25 a.m. in London from $1.4345 in New York yesterday, extending its advance this week to 0.7 percent. Europe’s currency was at 136.89 yen from 136.94 yen, and bought 85.58 pence from 85.49 pence. The dollar fetched 95.35 yen from 95.46 yen. The pound traded at $1.6773 from $1.6783. The Australian dollar bought 83.80 U.S. cents from 83.95 cents, and traded at 79.91 yen from 80.13 yen. The Dollar Index traded at 77.979 from 78.053 in New York yesterday. The gauge, which the ICE uses to track the U.S. currency against the euro, yen, pound, Canadian dollar, Swiss franc and the Swedish krona, fell to 77.428 on Aug. 5, the lowest level since Sept. 29. Germany’s Industrial Output Europe’s currency rose for the first time in four days against the dollar as the Economy Ministry in Berlin may say Germany’s industrial output increased 0.5 percent in June, following a 3.7 percent increase in May, according to a Bloomberg News survey of economists. European Central Bank President Jean-Claude Trichet yesterday kept the main refinancing rate unchanged at 1 percent and said interest rates are “appropriate,” signaling policy makers won’t change borrowing costs any time soon. The U.S. lost 325,000 jobs in July, slowing from a reduction of 467,000 in the prior month, a separate Bloomberg survey showed. The unemployment rate will increase to 9.6 percent, another survey showed. The Labor Department report is due at 8:30 a.m. in Washington. The number of Americans filing claims for jobless benefits fell by 38,000 to 550,000 in the week ended Aug. 1, the Labor Department said yesterday. “People are looking at the recent improvement in initial U.S. claims and suggesting there is an upside risk to tonight’s non-farm payrolls data,” said Masafumi Yamamoto, head of foreign exchange strategy for Japan at Royal Bank of Scotland Group Plc in Tokyo. “The market will try to price that in ahead of the data.” Australia’s Dollar Australia’s dollar traded near the highest level since September versus the U.S. dollar after a report yesterday showed the number of people employed in the South Pacific nation rose by 32,200 from June. Economists had forecast a decline. “Following the surprising good news on the labor market, traders priced in almost half another 25 basis point-rate hike by year-end, which has provided the Aussie with significant support on the crosses,” John Kyriakopoulos, Sydney-based head of currency strategy at National Australia Bank Ltd., wrote in a report today. Australia’s currency may strengthen to 86 U.S. cents over the next week or so, he said. Reserve Bank of Australia policy makers said in their quarterly policy statement today that they may increase interest rates at some point if the economic recovery continues. Australia’s benchmark interest rate of 3 percent compares with 0.1 percent in Japan and as low as zero in the U.S., making the South Pacific nation’s assets attractive to investors seeking higher returns. Asian Stocks Decline The yen trimmed this week’s decline against the euro as Asian stocks dropped, reducing demand for riskier investments. The Nikkei 225 Stock Average fell 0.7 percent and the MSCI Asia- Pacific Index of regional shares declined 1 percent. The yen is paring losses “partly because of stocks and jitters before the payroll numbers,” said Thio Chin Loo, a senior currency strategist at BNP Paribas SA in Singapore. “Ahead of payrolls, risk-taking is curtailed.” Investors should buy the euro against the pound after the Bank of England yesterday expanded its asset-purchase program by 50 billion pounds ($84 billion) to 175 billion pounds, according to Morgan Stanley. The central bank’s move suggests policy makers, who based the decision on quarterly forecasts prepared this month, assessed that their stimulus plan and record low interest rates weren’t enough to fight a recession that’s deeper than previously anticipated. ‘Negative Pound View’ “The BOE’s recent expansion of quantitative easing highlights the ongoing risks to the U.K. economy,” said Sophia Drossos, a currency strategist at Morgan Stanley, wrote in a research note yesterday. “We prefer to express our negative pound view via a basket of trades.” Morgan Stanley said it went long the euro at 85.50 British pence yesterday, with a target of 90.00 pence and a stop-loss order at 84.00 pence. A long position is a bet an asset will strengthen. A stop-loss order is an automatic instruction to sell or buy a currency should it reach a particular level. To contact the reporters on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

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