Jan. 26 (Bloomberg) -- The euro reached the highest level versus the dollar in more than two months on optimism the currency region will overcome its debt crisis as economic recovery takes hold and German inflation accelerates. The dollar approached a three-week low versus the yen on expectations that the Federal Reserve will reiterate today that $600 billion in debt purchases through June under quantitative easing is needed to reduce the 9.4 percent unemployment rate. The pound climbed from the lowest level against the dollar in almost two weeks as the Bank of England said two policy makers voted this month for a rate increase. “A lot of the euro-zone debt crisis has moved to the background, and the euro is continuing to push higher,” said Carl Forcheski, a director on the corporate currency sales desk at Societe Generale SA in New York. “Even though the U.S. is seeing some economic recovery gain traction, there’s still no real clue that the Fed is going to be departing from its quantitative-easing program.” The euro rose as much as 0.3 percent to $1.3722, the highest level since Nov. 22, before trading at $1.3673 at 8:47 a.m. in New York, compared with $1.3681 yesterday. The single currency was little changed at 112.50 yen, compared with 112.54 yen. The dollar traded at 82.21 yen, compared with 82.25 yen, after dropping on Jan. 19 to 81.85, the lowest since Jan. 4. German import-price inflation accelerated to an annual rate of 12 percent in December, the fastest pace since October 1981, statistics showed today. Economists expected the rate to rise to 10.8 percent, according to the median of 12 estimates in a Bloomberg News survey. Trichet on Inflation European Central Bank President Jean-Claude Trichet warned this month that policy makers may act to tame inflation. Bonds issued by the European Financial Stability Fund rose today in their first day of trading after yesterday’s 5 billion-euro ($6.8 billion) auction. The EFSF, which is financing part of the bailout of Ireland, drew 44.5 billion euros in orders as the Japanese government snapped up more than 20 percent of the issue. The pound strengthened 0.3 percent to $1.5854 after touching $1.5752 yesterday, the lowest level since Jan. 13. Bank of England policy maker Martin Weale joined Andrew Sentance in voting for a rate increase this month, and officials said the balance of risks to inflation had moved “upwards,” said minutes of the Jan. 13 rate decision released today. “The pound could gain a little bit as this was a surprise that now two members are voting for a rate hike,” said You-Na Park, a currency strategist at Commerzbank AG in Frankfurt. Dollar Index IntercontinentalExchange Inc.’s Dollar Index, a gauge of the greenback against the currencies of six major U.S. trading partners, dropped 0.2 percent to 77.864. The Fed will hold its target lending rate at zero to 0.25 percent, according to all of the 100 economists in a Bloomberg News survey. The central bank introduced the second round of its program of quantitative easing in November to keep borrowing costs low and shore up the economy. President Barack Obama used his State of the Union speech yesterday to propose a partial halt to spending increases that would save $400 billion from the budget in the next decade and a reduction of the corporate tax rate. --Editors: Dennis Fitzgerald, Paul Cox To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net; Emma Charlton in London at echarlton1@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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