USD gains as investors seek refuge after economic worsen

The dollar rose to the highest level in almost four months against the euro after a government report showed Australia’s economy unexpectedly shrank last quarter, boosting demand for the U.S. currency as a refuge.

The dollar climbed to $1.2495 per euro Tokyo from $1.2561. The greenback rose to 98.49 yen from 98.16 yen. The currency appreciated to $1.4026 from $1.4050 against the British pound and advanced to 1.1811 Swiss francs from 1.1760.

The yen strengthened to 123.03 per euro from 123.31. Japan’s currency rose 0.6 percent to 15.71314 versus South Korea’s won and advanced 0.5 percent to 62.29 against Australia’s dollar from late in New York yesterday.

The Dollar Index, which the ICE uses to track the U.S. currency versus the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, rose as much as 0.8 percent to 89.624 as investors sought shelter in the world’s reserve currency.

Gains in the yen may be limited after an aide to Japan’s opposition leader was arrested in a funding probe, signaling further political turmoil in the nation.

The senior aide to Ichiro Ozawa, head of the Democratic Party of Japan, was arrested on suspicion of receiving illegal political donations from a construction company. “I did absolutely nothing illegal,” Ozawa told reporters today in Tokyo, vowing to stay on as leader.