By Bo Nielsen and Ben Levisohn Dec. 14 (Bloomberg) -- The euro rose against most of its major counterparts after Abu Dhabi pledged to bail out Dubai World, easing concern Europe’s biggest banks will write down loans to the state-owned holding company. Europe’s currency advanced versus the Canadian dollar, Norwegian krone and Australian dollar as European stocks and U.S. equity-index futures climbed. The yen gained against all of the 16 most-traded currencies tracked by Bloomberg after Japan’s Tankan index of manufacturer confidence exceeded forecasts. “Abu Dhabi stepped in to bail out Dabai,” said Omer Esiner, a senior currency analyst at Travelex Global Business Payments in Washington. “That eased some concerns about a broad Dubai default, and we saw risk assets rally.” The euro traded at $1.4630 at 8:47 a.m. in New York, compared with $1.4615 on Dec. 11, when it fell to $1.4586, the lowest level since Oct. 5. The euro decreased 0.5 percent to 129.53 yen, from 130.24 at the end of last week. The dollar dropped 0.6 percent to 88.56 yen, from 89.10. The MSCI World Index of shares advanced 0.2 percent after the Dubai government said Abu Dhabi provided $10 billion to help Dubai World meet its obligations, including $4.1 billion needed to repay an Islamic bond maturing today for the real-estate unit Nakheel PJSC. Standard & Poor’s 500 Index futures expiring in March rose 0.5 percent. Gains in the euro were tempered by speculation the credit ratings of European nations will come under pressure, according to analysts. Spain’s Outlook Spain saw the outlook on its AA+ debt rating cut to “negative” from “stable” by Standard & Poor’s last week. Greece’s credit was reduced one step to BBB+ by Fitch Ratings. Portugal’s outlook was also revised to “negative” from “stable” by S&P. Greek Prime Minister George Papandreou may outline today structural reforms aimed at cutting his nation’s budget deficit. European Central Bank Vice President Lucas Papademos has said Greece’s fiscal situation is “extremely serious.” “Dollar strengthening may extend somewhat further against the euro as concerns over fiscal solvency in some euro-zone member countries dominate market focus,” Michael Hart, a currency strategist at Citigroup Inc. in New York, wrote in a research note today. Industrial production in the 16 nations using the euro retreated 0.6 percent in October following a revised 0.2 percent increase in the previous month, the European Union’s statistics office said today in Luxembourg. Economists in a Bloomberg survey forecast a reading of negative 0.7 percent. German Sentiment The ZEW Center for European Economic Research in Mannheim will say tomorrow its index of German investor and analyst expectations, which aims to predict developments six months ahead, fell to 50.0 from 51.1 in November, according to the median forecast of a separate survey. “The euro is likely to remain captive to downside risk, depending on the outcome of this week’s economic data,” said Toshiya Yamauchi, manager of foreign-exchange margin trading at Ueda Harlow Ltd. in Tokyo. The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain, so-called net shorts, was 511 on Dec. 8, compared with net longs of 22,151 a week earlier. That’s the first time since April 28 that short bets outnumbered longs. The dollar has risen against the euro since a Dec. 4 report showed that U.S. employers cut the fewest jobs in November since the recession began and the unemployment rate unexpectedly fell to 10 percent. Dollar and Economy “Why is good data suddenly supporting the dollar?” a team of analysts led by Ulrich Leuchtmann at Commerzbank AG in Frankfurt wrote today. “This development makes sense if one relies on good U.S. data eventually leading to an end of the Fed’s zero rate policy. Previously rate rises had moved into the very distant future so that the effect had been ignored. This is obviously changing now.” The yen advanced the dollar after the Tankan index of sentiment among big makers of products including cars and electronics climbed 9 points to minus 24 in December, the Bank of Japan said in Tokyo today. The median forecast of 19 economists surveyed by Bloomberg News was minus 27. A negative number means pessimists outnumber optimists. Japan’s currency is poised to replace the dollar as the top funding currency for investments in cities from Sydney to Sao Paulo after borrowing from Japan became almost as cheap as U.S. loans for the first time in four months. Rates on 90-day yen loans between banks have fallen the most in 13 years as record deflation prompted the Bank of Japan to start a $113 billion lending program last week. By easing demand for private-sector loans, the move helped shrink the gap between U.S. and Japanese London interbank offered rates by two- thirds over the past three months to 0.024 percentage point, the least since Aug. 26, data compiled by Bloomberg show. To contact the reporters on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net; Ben Levisohn in New York at blevisohn@bloomberg.net

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