The dollar is heading for its biggest weekly gain against the euro in almost 2 1/2 years in London on speculation spending and manufacturing reports next week will show U.S. economic growth is quickening, outpacing Europe's.

The U.S. currency traded at $1.0932 at 9:20 a.m. in London, versus $1.0941 late yesterday, when it rallied to a four-month high. The dollar has gained 3 percent against its European counterpart this week, the most since March 2001. It was at 117.85 yen from 117.67.

Orders to U.S. factories for durable goods probably rose 1 percent in July and consumer confidence gained in August, reports next week may show, according to the median forecast in Bloomberg News surveys. U.S. second-quarter growth may be revised up to a 2.9 percent annual pace, the Commerce Department will report on Thursday, according to a separate survey.

``The U.S. is the driving force in the global economy,'' said Mario Kelly, one of two partners at London-based Wallwood Consultants Ltd., the most accurate currency forecaster for the nine quarters ended March 31 in a Bloomberg News survey. Wallwood expects the dollar to gain to $1.07 by year's end. At the same time, its currency-trading computer model advised them to buy euros today at $1.0940, he said.

Claims for unemployment insurance fell last week to the lowest since February and Philadelphia-area manufacturing grew this month at the fastest pace in more than five years, reports yesterday showed. The index of leading economic indicators, a gauge of how the economy will perform in the next three to six months, increased in July for the fourth month, according to a separate report.

UBS Assessment

``There's an accumulation of evidence'' U.S. economic growth is accelerating and, along with rising stocks, that's supporting the dollar, said Karen Pringle, a senior treasury economist at ANZ Investment Bank in London.

U.S. stocks rose for a fifth day in six yesterday. ``It's prompting investors'' to shift out of other currencies and into dollars. The U.S. currency will probably be at $1.07 per euro by the end of September, Pringle added.

The euro's drop against the dollar may extend to $1.0760, said David Toth, a technical analyst at the securities unit of UBS AG, the largest trader in the $1.2 trillion a day currency market. His forecast is based on the currency's Fibonacci progression level, which tracks prices to identify trends.

``If the euro breaks through $1.0760, we may see it go down to $1.05,'' said Toth, who is based in Chicago.

Europe `Struggling'

The European Commission forecasts growth in the 12-country region that uses the euro between zero and 0.4 percent in the third quarter, unchanged from a July 10 estimate. Fourth-quarter growth will be between 0.2 percent to 0.6 percent, the EU's executive arm said in its first forecast of the period.

The euro region's economy shrank in the second quarter as a stronger currency during the period sapped demand for European exports, a revised European Union report will probably show next month. France's economy shrank in the second quarter. Germany, Italy and the Netherlands are already in recession.

``Strong data out of the U.S., and data out of Europe suggesting the euro-zone is struggling, is leading to dollar buying and euro selling,'' said Minoru Shioiri, a senior treasury and foreign-exchange manager in Tokyo at Mitsubishi Securities Co., the brokerage unit of Japan's third-biggest bank.

``Dollar buying based on the fundamental differentials may still continue.'' The U.S. currency may strengthen to $1.0880 per euro today, he said.

Relative Strength

The euro may pare its decline against the dollar and yen, according to the relative strength index for the currency. The 7- day relative strength index for the euro against the dollar fell to 15.7. The measure for the euro versus the yen fell to 15.4.

Some traders use the index, which measures the degree to which daily gains outpace daily losses in a given period, as a measure of when the direction of an asset is likely to change. A reading below 30 is a sign the currency is poised to gain.

The yen is set for its biggest increase against the euro since the week ended May 25, 2001. It is also set for its widest gain in seven weeks against the dollar on prospects for economic growth, and a rally in the Nikkei 225 Stock Average, which has risen more than 20 percent in 2003.

Japan's service industry activity in June rose more than some economists had forecast. The index, which measures business at retailers, utilities and other service companies, rose 1.2 percent in June from May, a government report showed, compared with the median forecast of a 0.2 percent increase in a Bloomberg News survey.

The dollar may rise against the yen on concern Japan's central bank will sell its currency to stem a gain that hurts export earnings. The Bank of Japan, at the instruction by the Ministry of Finance, sold a record 9.03 trillion yen ($76.6 billion) in January through July.

Zembei Mizoguchi, Japan's vice finance minister for international affairs, said ``the yen is in no condition to strengthen,'' and said the ministry will ``take appropriate action when necessary,'' indicating it may sell.