Yesterday the euro advanced to the strongest level in more than 10 weeks against the dollar as a report showed German business confidence rose to the highest level in seven months amid progress taming the region’s debt crisis. The Munich-based Ifo institute said its business climate index climbed to 109.6 from 108.3 in January, the highest reading since July, amid euro area efforts to prevent a default by Greece. The 17-nation currency pared gains after data forecast that Europe’s economy will shrink in 2012. The euro stayed higher even after the European Commission forecast of a shrinking euro-zone economy in 2012, with Italy and Spain facing sudden crunches as they battle to escape the debt crisis. The euro bloc will contract 0.3 percent, the commission said, abandoning a November forecast of 0.5 percent growth. The downgrade was mainly due to projected contractions of 1.3 percent in Italy and 1 percent in Spain.

The dollar dropped after U.S. initial jobless claims held at a four-year low, damping demand for safety. Applications for jobless benefits were unchanged in the week ended Feb. 18 at 351,000, the fewest since March 2008, Labor Department figures showed yesterday. The median projection in a survey called for 355,000 claims, marking the fourth straight week that the figures have been better than forecast. The number of people on unemployment benefit rolls dropped to the lowest level since August 2008.