By Daniel Kruger Feb. 10 (Bloomberg) -- Investors are the most bullish on the U.S. dollar since November 2008 on concern that weakening government finances in European nations will hurt the global economic recovery, a survey of Bloomberg users showed. The world’s reserve currency will rise over the next six months, according to respondents in the Bloomberg Professional Global Confidence Index. Confidence about the outlook for the global economy among the 2,486 participants in the survey, taken before European Union officials said they may aid Greece yesterday, dropped from the highest level since the series began two years ago. The dollar rose last week to its strongest level against the euro since May as Greece struggled to convince investors the government can cut its deficit below the European Union’s ceiling of 3 percent of gross domestic product. Spain and Portugal are also trying to control widening deficits, prompting investors to drive the euro down 3.8 percent this year. The drop in the euro “shows you the magnitude and momentum of the fears associated with Greece,” said Andrew Busch, a global currency strategist at Bank of Montreal in Chicago, and a survey participant. Sentiment toward the dollar reached 55.72 this month, from 53.11 in January and 42.42 in December, according to the survey. The measure is a diffusion index, meaning a reading above 50 indicates Bloomberg users expect the dollar to strengthen. The last time the reading was this high was November 2008, when it was 59.83. That was when the U.S. pledged to spend record amounts to bail out the financial system as credit markets froze. The Bloomberg Correlation-Weighted Index for the dollar rose as much as 10 percent the next four months. Euro Confidence Tumbles The fallout from the budget crisis in Greece has led German investors to become the most bearish on the 16-nation currency since November 2007, when Bloomberg began tracking survey data. Sentiment from German participants dropped to 37.5, while the readings for respondents in Spain declined to 25.19 and slid to 30 for those in France. European officials said yesterday they may assist Greece to prevent its budget deficit from eroding confidence in the euro. Options for Greece include bilateral aid or a package put together by a group of countries using the euro, said Michael Meister, financial affairs spokesman for German Chancellor Angela Merkel’s Christian Democratic Union. “We are talking about support in the broad sense,” Olli Rehn, the EU’s economic affairs commissioner, said yesterday. Meister said that aid would come “under strict conditions and if the Greek government undertakes far-reaching state reforms.” Paradigm Shift Speculation that economic growth will lag behind the U.S. and that the region’s debt won’t fall to pre-financial crisis levels for at least five years also are weighing on the euro, as well as assets denominated in the currency. “There does seem to be a slight shift in the paradigm,” said Samarjit Shankar, a managing director for the foreign- exchange group in Boston at Bank of New York Mellon Corp., the world’s largest custodial bank, with more than $20 trillion in assets under administration and a survey participant. “No longer is just risk aversion beneficial to the dollar. The dollar has its own set of drivers.” The Bloomberg Correlation-Weighted Index for the dollar has risen 6 percent from last year’s low on Nov. 25 as U.S. government reports showed the unemployment rate fell last month. Before the Dec. 4 payrolls report, the index fell about 21 percent from its peak last year in March as investors bought higher-yielding assets funded with dollars. Government Bond Yields “There are some good reasons to be confident about the dollar,” Busch said. “The economy’s coming back.” The U.S. economy will expand 2.7 percent in 2010, about twice as much as in the euro zone and Japan, according to the median forecasts in Bloomberg surveys of economists. The budget crisis in Greece has also bolstered the appeal of U.S. government debt. Yields on 10-year notes ended yesterday at 3.65 percent, down from the 4 percent high for the past year set in June. The prospect for an increase in 10-year Treasury note yields declined to 68.30 in February, from a peak of 76.65 a month earlier, the survey showed. Expectations for higher yields also declined in Germany, France and Spain last month. The index for German respondents dropped to 69.08 from 72.71. Pessimism fell to 66 from 72.08 among French participants, the least since October. In Spain, the measure slumped to 73.36 from 75.2, which was the highest since the surveys began. To contact the reporter on this story: Daniel Kruger in New York at dkruger1@bloomberg.net

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