The dollar rose against most of its major counterparts as a possible downgrade of Spain’s credit rating rekindled concern the euro zone’s financial crisis is spreading, spurring demand for the safety of the U.S. currency. The greenback rose against the euro and yen as U.S. data showed a recovering economy with historically low inflation. The Federal Reserve yesterday said it will continue with its $600 billion debt-buying plan to bolster the economy. The Swiss franc appreciated to a record against the euro on refuge demand. “The data comes at a time when the market is already a little bit more optimistic on the dollar.” said Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange Inc., a currency brokerage. “The market is likely to continue focusing on sovereign credit issues in Europe and that’s going to continue to be a dollar-positive story.” The dollar strengthened 0.2 percent to $1.3354 per euro at 9:59 a.m. in New York, from $1.3378 yesterday. It rose 0.3 percent to 83.87 yen from 83.66. The euro was little changed at 111.96 against the Japanese currency. Concern Europe’s debt problems may be spreading to other countries such as Spain drove the one-year cross-currency basis swap between euros and dollars to minus 53 basis points today, near a seven-month low of 55 basis points reached Nov. 30. A negative swap rate signals that investors are willing to receive reduced euro interest payments to obtain dollar-based financing. EU Summit As European Union leaders start a two-day summit in Brussels tomorrow with the focus on a permanent crisis-fighting system to be introduced in 2013, Moody’s said Spain’s credit rating may be cut from Aa1. The government is preparing its final bond sale of the year tomorrow amid concern it may follow Greece and Ireland in seeking a bailout. Spain has to raise 170 billion euros next year, while refinancing needs for its regions total 30 billion euros and for banks around 90 billion euros, Moody’s estimated. It doesn’t see a bailout as “likely.” “The Moody’s report, coming on the eve of the EU summit, helped to make the euro’s move more muted,” said Joe Manimbo, a market analyst in Washington at Travelex Global Business Payments, a currency-exchange network. Swiss Strength The Swiss franc rose 0.3 percent to 1.2805 against the euro, after appreciating to a record 1.2759. The franc has gained 15.8 percent against the common currency this year as investors became more concerned about the ability of European governments to contain the fiscal crisis and prevent a breakup of the 16-member region. “We have continued bad news out of Europe and continued strength out of Switzerland so that rotational move to find a euro alternative,” said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut. “It used to be sterling but now it has problems of its own so back to Switzerland.” Industrial production in the U.S. increased more than forecast in November, helped by gains in computers, home electronics and appliances, signaling factories will support economic growth into next year. Output at factories, mines and utilities rose 0.4 percent, the biggest gain since July, after a revised 0.2 percent drop in October, figures from the Federal Reserve showed today in Washington. Economists forecast a 0.3 percent gain, according to the median of 75 projections in a Bloomberg News survey. Manufacturing rose 0.3 percent for a second month. Price Trend The consumer-price index increased 0.1 percent after a 0.2 percent rise the prior month, the Labor Department said today in Washington. The median estimate of economists in a Bloomberg News survey called for a gain of 0.2 percent. Australian and New Zealand’s currencies fell for the first time this week against the greenback as the yield advantage over the U.S. for the South Pacific nations narrowed. Treasury yields traded near six month highs after Federal Reserve policy makers said yesterday the U.S. recovery is continuing and refrained from expanding a $600 billion program of debt purchases. The extra yield investors get from buying Australia’s 10- year government bonds instead of U.S. Treasuries reached 2.14 percentage points yesterday, the least since July 15. The premium offered by three-year government debt in New Zealand over the U.S. reached 3 percentage points yesterday, the narrowest since April 26. Aussie Falls Australia’s currency fell 0.5 percent to 99.43 U.S. cents and New Zealand’s dollar dropped 0.9 percent to 74.48 U.S. cents. The South Korean won was the biggest loser against the greenback among major currencies on prospects the authorities may boost measures to curb capital inflows after the Fed kept its plan to expand monetary stimulus. Korea’s National Assembly is moving closer to reviving taxes on foreign investors’ bond holdings. The parliament’s finance committee on Dec. 7 supported a bill that would tax interest income from treasury and central bank bonds by as much as 14 percent and put a 20 percent levy on capital gains from their sale. The won slid 1.3 percent to 1,154.80 per dollar. The Dollar Index rose as much as 0.7 percent to 79.881, the highest in two days. The index, is used by ICE futures exchange uses to track the greenback against the currencies of six major U.S. trading partners. To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net To contact the editor responsible for this story: Robert Burgess at bburgess@bloomberg.net

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