By Ye Xie Nov. 18 (Bloomberg) -- The yen fell against the euro and the dollar for the first time in three days as stock gains fueled speculation investors will be slower in selling higher- yielding assets funded by low-cost loans in Japan. Israel's shekel fell to the lowest level against the dollar in almost a year as investors bet the central bank will lower its benchmark interest rate further this month. The yen also dropped against the Australian and New Zealand dollars. ``In terms of currencies, we are still largely tracking equities,'' said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. ``It's still an equity-driven market.'' The yen dropped 0.6 percent to 122.69 against the euro at 10:31 a.m. in New York, from 121.99 yesterday. Japan's currency fell 0.6 percent to 96.99 versus the dollar, from 96.43. The dollar traded at $1.2655 per euro, compared with $1.2650. The ICE's Dollar Index, a gauge of the greenback against the euro, the yen, the pound, the Canadian dollar, the Swiss franc and Sweden's krona, rose to 86.987 from 86.807 yesterday. The index reached 88.147 on Nov. 13, the highest level since April 2006, as investors sought safety in U.S. assets. International demand for U.S. financial assets rose more than economists forecast in September as China surpassed Japan to become the biggest foreign holder of Treasuries. Overseas Purchases Total net purchases of long-term equities, notes and bonds increased $66.2 billion in September from $21 billion in the previous month, the Treasury said today. Stocks plunged and U.S. debt rose in September as Treasury Secretary Henry Paulson negotiated for two weeks with Congress over a $700 billion plan to address the worst financial crisis in 70 years. ``I am very, very bullish on the dollar,'' said Michael Klawitter, a currency strategist at Dresdner Kleinwort in Frankfurt. ``The main story that we are seeing at the moment is the high perception of risk, and that is leading to capital repatriation back into the U.S.'' Israel's shekel retreated as much as 1.6 percent to 3.9885 per dollar, the weakest since Dec. 18, on speculation policy makers will cut the 3 percent target lending rate as global financial turmoil imperils domestic economic growth. The yen dropped 0.6 percent to 62.95 against the Australian dollar and 0.4 percent to 53.28 versus New Zealand's currency on speculation carry trades, in which investors get funds in a country with low borrowing costs and buy assets where returns are higher, will unwind at a slower pace. Japan's 0.3 percent target lending rate compares with 5.25 percent in Australia and 6.5 percent in New Zealand. The Dow Jones Industrial Average increased 1.5 percent on better-than- expected corporate earnings. Australian Policy Minutes of the Reserve Bank of Australia's Nov. 4 meeting showed policy makers cut the cash target by 0.75 percentage point in response to ``the marked deterioration in global financial conditions'' in the past couple of months. ``The RBA is likely to reduce rates further,'' said Toshihiko Sakai, head of trading for foreign exchange and financial products in Tokyo at Mitsubishi UFJ Trust & Banking Corp., a unit of Japan's biggest bank. ``There's a downside risk for high-yielding currencies.'' The yen's 16 percent gain against the dollar this year led exporters including Toyota Motor Corp. to cut profit outlooks. Toyota, which makes more than 75 percent of its sales abroad, forecasts profit will fall this fiscal year by almost 70 percent. The automaker will fire 3,000 workers by March. For Related News: Stories on the euro and dollar: TNI DOLLAR EURO Stories on currencies: NI FRX

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