The dollar rose to its highest in more than a month against the euro in London trading before a report from the Federal Reserve Bank of Philadelphia that is likely to add to evidence that U.S. economic growth is accelerating.

Manufacturing in the Philadelphia area probably expanded in June after contracting in May, a report today will probably show, according to the median forecast of 53 economists surveyed by Bloomberg News.

The U.S. currency rose to $1.1628 at 9:16 a.m. in London from $1.1688 late yesterday. It earlier rose as high as $1.1586, its strongest since May 16. The dollar has dropped 9.8 percent against the euro this year. It was at 118.62 yen from 118.20.

``If investors become convinced by the U.S. growth story and the numbers prove to be stronger, that will be positive for the dollar,'' said Murray Gunn, who helps manage the equivalent of about $125 billion as director of currencies at Standard Life Investments in Edinburgh.

The Philadelphia index probably rose to 5 from minus 4.8 in May, according to the Bloomberg News survey of economists. The report, due at 5 p.m. London time, follows data earlier this week on New York manufacturing in May that showed the first increase in industrial production in four months. Consumer prices excluding food and energy posted their biggest rise since August, a separate report showed.

Signs of a strengthening economy may lead more traders and investors to reduce expectations of the size of a rate cut by the Federal Reserve next week. The Fed's benchmark rate is at 1.25 percent, compared with the European Central Bank's 2 percent.

``It definitely looks as if the worst-case scenario in the U.S. is not being borne out by the data, and that's helping the dollar across the board,'' said Jake Moore, currency strategist in Tokyo with Barclays Capital Plc, the ninth-largest trader in the global currency market, according to Euromoney magazine.

John Berry

Any gains for the dollar may be limited after The Washington Post's John Berry, the paper's Fed reporter, said the bank is more likely to cut rates by half a percentage point on concern the economy isn't growing enough to prevent deflation.

``Berry is seen as one of the best Fed watchers and he'll have an impact,'' said Jeremy Stretch, a currency analyst at RBC Capital Markets in London. ``Investors have been oscillating this week between whether it'll be a cut of 25 or 50 basis points.'' A basis point is 0.01 percentage point.

All 22 bond-trading firms that deal directly with the Fed expect a rate cut of at least 25 basis points by policy makers when they meet June 24-25. Nine forecast a 50 basis point cut.

Current Account

Investors will also look to a report due at 1:30 p.m. London time that will probably show the U.S. current-account deficit widened to $141 billion in the first quarter from $136.9 billion in the fourth quarter, according to a Bloomberg News survey.

The dollar has slumped 18 percent against the euro in the past 12 months on concern a faltering economy makes it harder for the U.S. economy to attract the about $1.5 billion a day in foreign investment needed to offset the current-account deficit.

``The current-account deficit is one of the main reasons why the dollar has come off,'' said Standard Life's Gunn. ``If people aren't buying dollars at the rate to fund the deficit, the dollar has to fall.''

The dollar's advance may also be curbed by expectations a report today will show filings for jobless benefits held above 400,000 last week. States may have received 425,000 new applications for unemployment, according to the median of 38 estimates in a Bloomberg News survey.

``Should initial jobless claims continue to stay above 400,000, that will limit the dollar's gain,'' said Akira Takei, who helps manage about $8.5 billion at Fuji Investment Management Co. in Tokyo. ``The number indicates the labor market is still weak, and the Federal Reserve will maintain an easing bias for its monetary policy.''

U.S. Backing

The yen also had its biggest decline in two weeks versus the dollar after the Yomiuri newspaper said Prime Minister Junichiro Koizumi told business executives that the U.S. backs Japan's policy of favoring a weaker currency.

Koizumi said in a meeting with President George W. Bush he prefers a weaker yen against the dollar because it would make it easier for him to proceed with changes in financial policy and the banking industry, the Yomiuri reported. Bush said the U.S. understands that position and supports a strong dollar, it said.

``Support from the U.S. will make it easier for Japan to sell its currency,'' said Minoru Shioiri, senior manager of the treasury and foreign-exchange division at Mitsubishi Securities Co., the brokerage unit of Japan's third-biggest bank. ``This report will pressure the yen, especially against the dollar.''

Yen Sales

The Bank of Japan, at the behest of the Ministry of Finance, spent more than 6 trillion yen ($50.7 billion) between January and May in the currency market, according to central bank figures.

An appreciation in the yen threatens exports, which account for about 11 percent of the world's second-largest economy, which is threatened with a fourth recession in 12 years.

A drop in Japanese bonds also dragged the yen lower. Traders said foreign investors sold yen proceeds after they dumped government bonds as their record-low interest rates were unattractive. The No. 250 bond, which carries a 0.5 percent coupon and matures in 2013, plunged 1,534 to 98.086, according to Japan Bond Trading Co.

``We're looking at a turnaround in the U.S. economy,'' said Patrice Conxicoeur, who oversees the equivalent of $762 million in investments as chief executive officer at Sinopia T&D Asset Management Co., in Tokyo. ``Everyone has grown increasingly uncomfortable with yields so low,'' on Japanese bonds. ``They're buying foreign bonds.''

In other trading, the British pound dropped to $1.6768 from $1.6786. The dollar surged to 1.3316 Swiss francs from 1.3226.