The euro rose one cent against the dollar and climbed to the highest in three weeks versus the U.K. pound after German business confidence unexpectedly increased.

The euro also gained versus the Japanese yen after the Munich-based Ifo institute said its business-climate index rose in May. The yen advanced to the highest in more than a week against the dollar as a decline in European and Asian stocks prompted investors to pare holdings of higher-yielding assets funded in the Japanese currency. The Australian dollar rose to a 24-year high against the U.S. currency.

``Ifo obviously shows the German economy is very resilient and is in a much better position than the rest of the world,'' said Derek Halpenny, head of global currency research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. ``The euro will appreciate again and start hitting new all-time highs on the back of the resilience of the German economy.''

The euro climbed to $1.5769 as of 7:05 a.m. in New York, from $1.5646 yesterday. It also advanced to 80.02 pence per pound, from 79.49 yesterday, and traded at 162.67 yen, from 162.22. The yen climbed to 103.18 per dollar, from 103.68.

The Ifo institute said its index, based on a survey of 7,000 executives, rose to 103.5, from 102.4 in April. Economists predicted a decline to 102, according to the median of 44 forecasts in a Bloomberg News survey.

European government bonds dropped, driving the yield on the two-year note 8 basis points, or 0.08 percentage point, higher to 4.07 percent, the most since Nov. 1.

ECB Rates

The ECB shelved a planned interest-rate increase last year to assess the economic impact of the credit squeeze. It has left the benchmark rate at a 6 1/2-year high of 4 percent since June. ECB President Jean-Claude Trichet said last month there is ``strong short-term upward pressure on inflation' and the economy has ``sound'' fundamentals.

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