The euro fell for a fourth straightweek against the yen, touching the lowest level in almost 12years, as signs the European debt crisis is worsening dampeddemand for the shared currency.

LONDON, July 19 (Reuters) – Sterling hovered near a 3 1/2year high against the euro on Thursday, benefiting frominvestors viewing it as a relative safe haven from the eurozone’s debt crisis, with further gains seen likely if UK retailsales data beats expectations.

The dollar dropped against most major peers as investorsadded to bets the Federal Reserve will take new steps tostimulate economic expansion that may debase the currency.

Australia’sdollar climbed as implied volatility fell to an almost five yearlow and traders sought higher yields, while the euro slid evenas European officials approved an aid package for Spanish banks.

The Spanish region of Valencia prepared to seek a rescue from the central government and European finance ministers approved the bailout of the nation’s banks.

“Uncertainty has increased in the region, giving investorsanother reason to shun the euro,” Joe Manimbo, a market analystin Washington at Western Union Business Solutions, a unit ofWestern Union Co.

Bernanke reiterated to Congress this weekpolicy makers are “prepared to take further action asappropriate to promote a stronger economic recovery. The Fedbought $2.3 trillion of securities from 2008 to 2011 in tworounds of a tactic called quantitative easing.. Growth in US gross domestic product slowed to 1.4 percentfrom April through June, a Bloomberg News survey forecast beforethe Commerce Department reports the data July 27. The figurecompares with 1.9 percent in the first quarter and 3 percent inthe last three months of 2011. Data this week showed unexpecteddrops in retail sales and Philadelphia region manufacturing.. “The markets are inching toward expectations that the Fedwill have to do something in terms of a policy initiative,whether that’s QE3 or something else,” Robert Sinche, globalhead of currency strategy at Royal Bank of Scotland Plc’s RBSSecurities unit in Stamford, Connecticut, said on July 19.They’re moving in that direction, which is more broadlydollar negative.. Australia’s dollar was the best performing major currency,rallying 1.5 percent to $1.0378 and gaining 0.6 percent to 81.46yen. The Aussie rose to A$1.1705 per euro yesterday, a record.. The implied volatility of three month options on Group ofSeven currencies touched 8.32 percent yesterday, the least sinceNovember 2007, a JPMorgan Chase & Co. measure showed. Lowervolatility makes investments in currencies with higher benchmarklending rates more attractive because the risk in such trades isthat market moves will erase profits. The average over the pastfive years is 12.4 percent.. South Africa’s rand weakened against the greenback afterthe nation’s central bank unexpectedly cut its key interest rateon July 19 to 5 percent, from 5.5 percent. The rand declined 0.3percent to 8.2868 per dollar.. To contact the reporters on this story:Allison Bennett in New York at ;Joseph Ciolli in New York at . Bloomberg moderates all comments. Comments that are abusive or off topic will not be posted to the site. Excessively long comments may be moderated as well. Bloomberg cannot facilitate requests to remove comments or explain individual moderation decisions.. Current DateTime: 10:49:11 20 Jul 2012LinksList Documentid: 39635450Expiration DateTime: 7/20/2012 10:51:50 PMThe Falling Fortunes of the One Percent 20 Jul 2012Now It’s the Big Banks That Are Getting Foreclosed On 20 Jul 2012Extreme Perks: Get Paid Extra to Go On Vacation 20 Jul 2012Your First Move For Friday July 20th 20 Jul 2012Keep an Eye on This 204% Lender 20 Jul 2012Why Gasoline Prices Could Keep Moving Higher 20 Jul 20122 Dividend Stocks to Sell for Profits, 1 to Buy for Growth 20 Jul 2012Two ‘Lottery Tickets’ That Just Might Pay Off 20 Jul 2012Top Tech Picks From a Hedge Fund Guru 20 Jul 2012Want a Job on Wall Street? ‘Let us Sleep With Your Girlfriend’ 20 Jul 2012. Current DateTime: 10:49:11 20 Jul 2012LinksList Documentid: 39635452Expiration DateTime: 7/20/2012 10:51:52 PMNo Huddle Offense: Stay Domestic, Buy PullbacksAurora Police News Conference on ShootingMad Money, July 20, 2012Earnings Wrap & Who’s On DeckTalking Numbers: Time to Get in General Electric?Mitt Romney: ‘Unspeakable Tragedy’The Week AheadInside the Diamond RushOptions Action Web Extra: Las Vegas SandsSpanish Protesters Take to the Streets. LONDON (Reuters) – Gold prices extended gains to rise by around 1 percent on Thursday as the dollar dropped to a two week low against a basket of currencies and equities rose, reflecting a modest pick up in appetite for risky assets.. The euro gained against the dollar and European shares rose after a media report said the European Financial Stability Facility (EFSF) would be able to buy Spanish bonds on the primary and secondary markets. <FRX/>. Gold tends to benefit from dollar weakness, which makes assets priced in the US unit cheaper for holders of other currencies. Spot gold was up 0.9 percent at $1,586.61 an ounce at 1252 GMT, while US gold futures for August delivery were up 0.7 percent to $1,581.80 an ounce.. “The push is definitely coming from firmer equity markets and this lends some support to commodity prices.

Greece, where Europe’s debt crisis began in 2009, was thefirst euro member to get a rescue package.

The euro’s risk adjusted loss of 0.69 percent against thedollar this year was the largest among major currencies, theBloomberg Riskless Ranking showed.

The risk adjusted return, which isn’t annualized, iscalculated by dividing total return by volatility, or the degreeof daily price variation, giving a measure of income per unit ofrisk.

A higher volatility means the price of an asset can swingdramatically in a short period, increasing the potential forunexpected losses.

Japan’s currency rose versus the greenback as the extrayield investors receive for investing in US two year debtversus comparable Japanese government bonds dropped, limitingdollar denominated assets’ appeal.

The yield gap was 10 basispoints yesterday, compared with 28 basis points on March 20.

Demand for refuge from Europe’s financial turmoil drovegovernment debt yields to record lows in the US, the U.

The yen climbed 8.6 percent over the past three monthsversus nine developed nation counterparts tracked by BloombergCorrelation Weighted Indexes, the best performance.

Bernanke ‘Prepared’ The greenback fell against most major counterparts afterFed Chairman Ben S.

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