The dollar fell to a six-week low versus the euro on speculation the Federal Reserve’s willingness to ease monetary policy further will damp demand for U.S. assets. The greenback fell against 13 of its 16 major counterparts after U.S. policy makers said yesterday they “will provide additional accommodation if needed” to spur growth. The euro rose for a third day before Portugal sells bonds today after investors bought the maximum amounts offered at Spanish and Irish debt sales yesterday. New Zealand’s currency rose to a one-week high before a report tomorrow forecast to show economic growth accelerated last quarter. “Clearly, the Fed is leaning toward further monetary easing,” said Adam Carr, a senior economist in Sydney at ICAP Australia Ltd., a unit of the world’s largest interdealer broker. “This is enough for currency punters to dump the dollar.” The dollar dropped to $1.3303 per euro as of 7:42 a.m. in London from $1.3264 yesterday in New York, after reaching $1.3314, the weakest since Aug. 6. The greenback fell to 84.89 yen from 85.09 yen. The euro rose to 11.013 yen from 112.87, after reaching 113.08 yen, the highest since Aug. 10. The Federal Open Market Committee said in a statement after its meeting yesterday in Washington that “inflation is likely to remain subdued for some time before rising to levels the committee considers consistent with its mandate.” Fed Statement Futures on the Chicago Mercantile Exchange show a 70 percent chance the U.S. central bank will keep its target rate for overnight bank lending between zero and 0.25 percent through its June 2011 meeting, up from 61 percent odds a day earlier. “Dollar-selling pressure is likely to persist, given expectations for additional quantitative easing by the Fed,” said Masafumi Yamamoto, chief currency strategist at Barclays Bank Plc in Tokyo. “This may cause the dollar-yen to weaken.” The Federal Housing Finance Agency’s monthly index for house prices fell 0.2 percent in July, after a 0.3 percent drop in June, according to a Bloomberg survey before today’s report. The Dollar Index, which tracks the U.S. currency against those of six major U.S. trading partners, fell 0.4 percent to 80.097 after reaching 80.049, the lowest since Aug. 6. Portuguese Auction The euro rose for a third day against the dollar as Portugal prepared to issue as much as 1 billion euros ($1.3 billion) in bonds today. Ireland sold 1.5 billion euros of debt yesterday, the National Treasury Management Agency said. Spain sold 7 billion euros of 12-month and 18-month bills, the maximum target, the Bank of Spain said. The auction results “suggest that concerns are abating,” Steven Englander, New York-based head of Group of 10 currency strategy at Citigroup Inc., wrote in a note yesterday. “The euro is increasingly attractive in an environment of likely further quantitative easing, abating risk aversion and with positioning at best neutral and probably still largely short euro.” A short position is a bet an asset will fall. The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- so-called net shorts -- was 9,644 on Sept. 14 compared with net shorts of 23,699 a week earlier, data from the Commodity Futures Trading Commission showed on Sept. 17. Demand for the yen was tempered on speculation Japan will sell its currency again after intervening in the foreign- exchange market last week for the first time in more than six years. The yen has risen about 1 percent since the intervention on Sept. 15 pushed it down to a one-month low from the strongest level in 15 years. BOJ Easing Bank of Japan board member Ryuzo Miyao said today the central bank is monitoring the impact of the yen’s strength on the economy and the currency’s gain is a downside risk to the nation’s recovery. He also said the bank plans to take appropriate credit-easing steps if needed. Prime Minister Naoto Kan said Japan should put in place economic and monetary policies to weaken the yen, the Financial Times reported today, citing an interview. “This is the pivotal area for dollar-yen,” said Matthew Brady, executive director for foreign exchange at JPMorgan Chase & Co. in Sydney. “This is the area where there was intervention last week and the market will maybe put a line through the sand around 84.80 yen.” The New Zealand dollar rose before a report tomorrow that economists said will show the nation’s recovery quickened. Gross domestic product increased 0.7 percent in the second quarter, faster than a 0.6 percent gain in the previous three months, according to a Bloomberg survey ahead of the data. New Zealand’s dollar gained 0.4 percent to 78.83 U.S. cents. To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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