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By Bloomberg

The euro strengthened against most of its major counterparts amid speculation the European Central Bank will refrain from adding monetary stimulus at its policy meeting today as it assesses the impact of previous steps.

The single currency reached its strongest level in 10 months versus Japan's yen, whose central bank last month expanded its bond purchases as part of efforts to end deflation. A gauge of the dollar retreated from its highest close since 2009, though still headed for a weekly gain before tomorrow's payrolls report. Deutsche Bank AG's measure of foreign-exchange price swings climbed to the most in more than a year.

"As far as the euro is concerned, we don't expect that the ECB will step up its rhetoric at this stage," said Roberto Mialich, a senior currency strategist at UniCredit SpA in Milan, referring to the ECB press conference scheduled for after the policy decision. "Tomorrow's payrolls numbers in the U.S. will be a more critical driver for the euro at this juncture."

The common currency rose 0.3 percent to $1.2519 at 12:21 p.m. London time, after slipping 0.5 percent yesterday. It has recovered from as low as $1.2440 on Nov. 3, a level last seen in August 2012. The euro climbed 0.2 percent to 143.49 yen, after reaching 144.22, the highest since Jan. 2. The yen was little changed at 114.61 per dollar, after depreciating as much as 0.8 percent to 115.52, the weakest since November 2007.

The euro gained 0.5 percent to 78.54 British pence after the Bank of England kept its benchmark interest rate at a record-low 0.5 percent.

ECB Meeting

ECB officials meeting today will leave the main refinancing rate at a record low of 0.05 percent and the deposit rate at minus 0.2 percent, according to all economists questioned in separate Bloomberg surveys. The institution is set to announce its decision at 1:45 p.m. in Frankfurt, and President Mario Draghi will address journalists afterward.

Europe's single currency advanced 0.4 percent against the dollar on Oct. 2, after the Governing Council left interest rates unchanged and Draghi said the central bank will start acquiring covered bonds. When the ECB last cut rates, on Sept. 4, the euro fell 1.6 percent versus its U.S. peer.

The euro has declined against all but two of its 16 major counterparts this year as the ECB cut interest rates, offered cheap, longer-term loans to banks and embarked on purchases of some bonds as it sought to boost an inflation rate that remains below its target of just under 2 percent.

Dollar Index

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, fell 0.1 percent to 1,090.27 after closing yesterday at 1,091.26, the highest since April 2009.

The Federal Reserve is moving closer to its first rate increase in eight years after it ended its unprecedented asset- purchase program last month.

U.S. employers added 235,000 workers in October, according to a Bloomberg News survey of analysts before tomorrow's Labor Department report. Economists predict the jobless rate held at 5.9 percent, the lowest since July 2008.

"Economic data out of the U.S. have been relatively strong lately," said Yuki Sakasai, a foreign-exchange strategist at Barclays Plc in New York. "We expect the Fed to raise rates in June and U.S. yields, which are pricing in a hike around the third quarter, to play catchup, pushing dollar-yen higher."

BOJ Target

The yen has tumbled 5.7 percent in the past three months, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar gained 7.3 percent, while the euro weakened 0.4 percent.

Bank of Japan Governor Haruhiko Kuroda said yesterday the central bank will continue easing as long as needed to achieve stable 2 percent inflation and will adjust monetary policy without hesitation if necessary. At a meeting on Oct. 31, the BOJ raised the annual target for buying Japanese government bonds to 80 trillion yen, from a level of 60 trillion yen to 70 trillion yen.

"I don't see anything to stop the yen from weakening," said Makoto Noji, the senior debt strategist at SMBC Nikko Securities Inc. in Tokyo. "Kuroda's comments as well as the government's tolerance to yen weakness are helping to push the yen lower."

Currency swings increased after the BOJ's stimulus boost roiled markets and prompted speculation that the ECB will respond to prevent the euro from rising. Other currencies also felt the impact, with Australia's dollar sliding to a four-year low versus the dollar, and New Zealand's currency reaching the weakest in two years.

The Aussie dollar rose 0.2 percent today to 86.13 U.S. cents, after reaching 85.54 cents, the weakest since July 2010. The kiwi increased 0.1 percent to 77.37 cents, rallying from 76.68 cents, the weakest since June 2012.

Deutsche Bank's Currency Volatility Index was at 8.63 percent, headed for its highest close since September 2013. It fell to a record 4.93 percent on July 21.

"There's certainly a lot of potential for volatility out there," said Greg Gibbs, the head of Asia-Pacific markets strategy at Royal Bank of Scotland Group Plc in Singapore.