By Yasuhiko Seki and Ron Harui Feb. 1 (Bloomberg) -- The dollar traded near a four-month high against the Swiss franc as signs the world’s largest economy is gaining momentum spurred investors to buy U.S. assets. The greenback approached a three-week high versus the pound before reports that may show U.S. manufacturing expanded for a sixth month and household purchases rose. The euro was near a nine-month low versus the yen on concern Greece’s budget problems will spread. The yen gained for a second day against South Korea’s won as falling Asian stocks damped demand for emerging-market assets. “The incoming data will underscore that the U.S. economy is on the mend,” said Koji Takeuchi, senior economist in Tokyo at Mizuho Research Institute Ltd., a unit of Japan’s second- largest banking group. “Improving economic fundamentals will support the dollar.” The U.S. currency traded at 1.0603 franc as of 6:54 a.m. in London from 1.0606 in New York on Jan. 29, when it rose to 1.0643, the highest since Sept. 4. The dollar was at $1.5963 per pound from $1.5986, after reaching $1.5936, the strongest since Jan. 8. The greenback bought 90.20 yen from 90.27 yen. The euro was at 125.28 yen from 125.13 after declining to 124.43, the weakest since April 28. It traded at $1.3889 from $1.3863. Japan’s currency climbed to 12.9638 won from 12.8689. ISM Manufacturing The Institute for Supply Management’s factory index was 55.5 in January, according to a Bloomberg News survey of economists before the report is released today. Readings greater than 50 signal expansion. U.S. household purchases rose 0.3 percent after climbing 0.5 percent in November, according to a separate survey before the data is released today. The dollar advanced last week as the Commerce Department said U.S. gross domestic product increased at a 5.7 percent annual pace from October through December, the fastest pace in six years. Futures traders increased bets to the highest level in more than a year that the euro will weaken against the greenback, data from the Washington-based Commodity Futures Trading Commission showed. The difference in the number of wagers by hedge funds and other large speculators on a drop in the euro compared with those on a gain -- so-called net shorts -- was 39,539 on Jan. 26, the largest short position since September 2008. Greece Woes The euro fell 2 percent against the dollar last week, the biggest weekly loss since April 2009, on concern fiscal deficits in the 16-nation euro region will increase, diminishing the appeal of the European currency. The euro weakened 6.1 percent versus the yen in January in its sharpest drop since a 9.1 percent slide in January 2009. Greece’s bonds tumbled last month on concern the country will fail to reduce its budget deficit without outside help. The bonds were the world’s worst performers in January, losing 6 percent, Bloomberg/EFFAS indexes show. The European Commission said last week it expects to give an assessment of Greece’s budget plan on Feb. 3. “Sovereign debt worries in Greece, Portugal and Spain continue to hang over the euro,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “As long as these worries continue, we are likely to see ongoing ‘safe- haven’ support for the dollar and the yen.” Asian Stocks The yen climbed as the MSCI Asia Pacific Index of regional shares slipped 0.4 percent. Japan’s currency often strengthens in times of financial turmoil as the nation’s trade surplus makes it attractive as it means the nation does not have to rely on overseas lenders. The dollar benefits as the world’s main reserve currency. “Declining stocks added to risk aversion,” said Akira Hoshino, chief manager of the foreign-exchange trading department in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd. “Increased risk aversion enhances buying of safe-haven currencies.” Losses in the euro were tempered on speculation the currency’s recent losses were too rapid. “The euro has been sold quite a lot, so short positions are probably being unwound,” said Nobuaki Kubo, vice president of foreign exchange in Tokyo at BBH Investment Services Inc., a unit of New York-based Brown Brothers Harriman & Co. “This is causing the euro and cross-yen currencies to rebound a bit.” The euro’s 14-day relative strength index stayed below 30 for a third-straight day, a sign the currency may be poised to rebound after dropping too rapidly. To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

Source