The dollar declined to $1.41 against the euro for the first time this year as growing evidence the global recession is easing sent investors in search of assets with higher returns. The U.S. currency headed for its biggest monthly drop versus the euro in 2009 and fell today against major counterparts including the Australian and New Zealand dollars after South Korea said its state pension fund plans to hold fewer Treasuries. The pound traded above $1.60 and was poised for its biggest monthly gain since March 1985 after U.K. house prices unexpectedly jumped in May. “When people become less risk-averse, they don’t need the dollar as a safe haven,” said Philip Marey, a U.S. economist at Rabobank International in Utrecht, Netherlands. “There does appear to be some stabilization in the banking sector and the real economy, and that’s led to a decline in risk perceptions.” The dollar weakened 1.2 percent to $1.4111 per euro at 8:35 a.m. in New York, from $1.3941 yesterday, bringing its decline this month to 6.1 percent, the biggest since December, when it dropped 9.2 percent. The dollar depreciated 1.1 percent to 95.75 yen from 96.85. The yen traded at 135.05 per euro, compared with 135.04 yesterday. The U.S. currency dropped for a second day versus the euro as every major stock market in Europe advanced, with the Dow Jones Stoxx 600 Index rising 1.3 percent. Standard & Poor’s 500 Index futures expiring in June gained 0.7 percent. ‘Capital Outflows’ “Capital outflows from the dollar are now at work,” said Kengo Suzuki, manager of the foreign bond trading department in Tokyo at Mizuho Securities Co., a unit of Japan’s second-largest banking group. “Economic data at home and abroad now suggest the worst of the recession is over.” The currencies of emerging-market nations and commodity producers rose as oil and industrial metals advanced after India’s statistics office said the country’s economy grew a greater-than-estimated 5.8 percent in the first quarter from a year earlier. The rupee advanced as much as 1.1 percent to 47.0875 per dollar, the biggest intraday gain since May 19, while the South African rand added 1 percent to 7.9461 per dollar. The Australian dollar climbed 1.8 percent to 79.83 U.S. cents, and the New Zealand rose 2.2 percent to 63.71 cents. The dollar weakened as South Korea’s National Pension Service, which had 236 trillion won ($187 billion) of assets at the end of 2008, said it pared its allocation for Treasuries over the next five years. South Korean Pension “The report of the Korean pension fund’s plan to reduce its weighting of U.S. Treasuries triggered buying of the euro against the dollar,” said Takashi Kudo, director of foreign- exchange Sales in Tokyo at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. The euro rose versus the dollar after Germany’s Wiesbaden- based Federal Statistics Office said retail sales, adjusted for inflation and seasonal swings, rose 0.5 percent from March, after three months of declines. The 16-nation currency also advanced as crude oil headed for its biggest monthly gain in a decade, adding to speculation the European Central Bank will avoid an interest-rate cut next week to prevent stoking inflation. “Rising crude oil prices give little reason for the ECB to take action on interest rates,” said Akio Yoshino, chief economist in Tokyo at Societe Generale Asset Management (Japan) Co. “The yield advantage will support the euro.” Target Lending Rates The ECB’s benchmark policy rate is 1 percent, compared with as low as zero in the U.S. and 0.1 percent in Japan. Crude oil for July delivery rose as much as 1.7 percent to $66.17 a barrel on the New York Mercantile Exchange, taking its advance in May to 29 percent, the biggest monthly gain since March 1999. Sterling rose 1.2 percent to $1.6142 after Nationwide Building Society said U.K. house prices unexpectedly jumped 1.2 percent in May and GfK NOP reported consumer confidence matched the highest level in almost a year. The pound reached $1.6183, the highest level since Nov. 5. It rose 9.3 percent since April 30, the most since March 1985, when it climbed almost 15 percent. “The pound is rising partly because of the housing survey and because of the overall positive momentum in the gradual recovery story coming through,” said Thanos Papasavvas, head of currency management in London at Investec Asset Management. “There was a lot of bad news priced into sterling. This is partly a rebalancing back to fair value for the pound.” Yen Versus Euro The yen fell earlier versus the euro as Japan’s Trade Ministry said factory production climbed 5.2 percent in April from the prior month, reducing demand for the currency as a refuge. The median estimate of 30 economists surveyed by Bloomberg News was for a 3.3 percent increase. The Japanese currency declined 1.3 percent against the dollar this week as optimism about a global recovery spurred Japanese investors to look abroad for higher returns. Japanese investors bought 641.1 billion yen ($6.61 billion) more overseas bonds and notes than they sold in the week ended May 23, the biggest net purchases in a month, according to the finance ministry.

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