By Ben Levisohn and Paul Dobson Feb. 9 (Bloomberg) -- The euro rose the most in almost a month versus the dollar on speculation European officials meeting this week will agree to assist Greece in reducing its budget deficit. Japan’s currency slid the most against the euro in more than two months after a European Central Bank spokeswoman said President Jean-Claude Trichet will leave a meeting in Sydney early for a European Union summit. Australia’s dollar gained versus the greenback after Reserve Bank Governor Glenn Stevens warned that keeping interest rates too low for too long may hamper efforts by policy makers to prevent future asset bubbles. “There’s a lot of talk about Trichet coming back and people are optimistic of a bailout plan for Greece, Spain and Portugal,” said Firas Askari, head currency trader in Toronto at Bank of Montreal, Canada’s fourth-largest lender. “People are being hopeful that some bailout package is being planned and that’s pushing the euro higher.” The euro rose 0.7 percent to $1.3742 at 10:36 a.m. in New York, from $1.3649 yesterday. It gained as much as 0.9 percent, the most since Jan. 11. The yen fell 0.9 percent to 122.88 versus the euro, from 121.81. It earlier slid 1.5 percent, the biggest intraday loss since Dec. 3. The yen declined 0.2 percent to 89.41 per dollar, from 89.26. Europe’s single currency fell to $1.3586 on Feb. 5, the lowest intraday level since May 20, as investors bet sovereign risk crises will force policy makers to keep interest rates at record lows longer and a report showed the U.S. unexpectedly lost jobs in January. Credit-default swaps on the debt of Spain and Portugal rose to records yesterday. Contracts on Greece reached a record last week. ‘Turns the Ship’ Greek Prime Minister George Papandreou said his government is taking difficult measures to save the economy, according to an e-mailed statement of his comments to a Cabinet meeting today. Papandreou said the country was a victim of speculative attacks and that he will meet with French President Nicolas Sarkozy tomorrow, noting that Sarkozy has spoken in the past of the need for regulations to govern markets. Investors should buy the euro at $1.3737 as the currency’s 10-week tumble against the greenback may be over, according to Citigroup Inc. “There are good indications that euro-dollar may have set a low at the end of last week,” technical analysts led by Tom Fitzpatrick in New York wrote in a report. “Focus is on near term resistance at 1.3750 and a close above there would be a bullish short-term development.” ‘Some Aspects’ Trichet will depart today from a symposium marking the Reserve Bank of Australia’s 50th anniversary to attend this week’s gathering of EU leaders, an ECB spokeswoman, Regina Schueller, said. EU President Herman Van Rompuy said yesterday in a letter to nations’ leaders that the summit will discuss “some aspects of the present economic situation,” without making a direct reference to Greece’s financial crisis. The focus of the meeting will be long-term economic strategy, he said. Traders “have taken the euro higher amid speculation that the EU is about to announce some sort of deal for Greece,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York, wrote in an emailed note today. “The risk is the market is setting itself up for disappointment if it is buying the euro on ideas of an EU rescue.” Greece’s Finance Minister George Papaconstantinou said yesterday in a Bloomberg Television interview in Athens that calling for outside aid would be “the worst possible signal which we could send out.” Strong Dollar French Finance Minister Christine Lagarde said at a news conference today that Europe wants a strong dollar, which will benefit the continent’s exporters. She also said she is confident that Greece will successfully implement its plan to cut the European Union’s largest budget deficit. Sterling fell as much as 0.7 percent to 1.1350 euro, the lowest level in more than three weeks, after a report showed that the U.K. trade deficit swelled in December to the widest in almost a year as imports rose faster than exports. The goods-trade gap was 7.3 billion pounds ($11.4 billion the most since January 2009, the Office for National Statistic said today in London. “Now that sterling is recovering, exports are collapsing,” said Sebastien Galy, a currency strategist at BNP Paribas SA in New York. ‘Sluggish’ Growth Bank of England Governor Mervyn King is counting on the weakness of the pound to aid exports and help rebalance the economy away from domestic demand as it shakes off the recession. Policy makers said last week that Britain had “sluggish” growth in the fourth quarter and faces a “gradual” recovery. Australia’s dollar rose 1 percent to 87.37 U.S. cents and increased 1.4 percent to 78.28 yen after the RBA’s Stevens signaled he may increase borrowing costs, and as gains in Asian stocks revived demand for higher-yielding assets. “If the root problem is simply that interest rates are too low, experience suggests that efforts to handle the problem by regulation aimed at constraining balance-sheet growth won’t work for long,” Stevens said in paper delivered at the Sydney meeting of central bankers. To contact the reporters on this story: Ben Levisohn in New York at blevisohn@bloomberg.net; Paul Dobson in London at pdobson2@bloomberg.net.

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