The dollar advanced against most of its major counterparts as stocks and Treasuries fell on speculation the Federal Reserve will buy less debt than some traders estimated under quantitative easing. The U.S. currency gained against Australia’s dollar and South Korea’s won as reports showed signs the nations’ recoveries are slowing. The greenback pared its increase versus the euro as orders for non-military capital equipment excluding airplanes dropped in September. “What you’re seeing is asset prices responding negatively and the dollar responding positively to toned-down expectations for quantitative easing,” said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. The dollar appreciated as much as 0.7 percent to $1.3771 per euro, the strongest level since Oct. 20, before trading at $1.3804 at 8:37 a.m. in New York, compared with $1.3859 yesterday. The U.S. currency climbed 0.4 percent to 81.72 yen, from 81.43 yen. The euro traded at 112.87 yen, compared with 112.86 yen. The MSCI World Index of shares fell 0.3 percent, and the yield on the 10-year Treasury note rose 0.06 percentage point to 2.70 percent. Bookings for goods including computers and machinery meant to last at least three years fell 0.6 percent last month, the Commerce Department reported. The median forecast of 10 economists in a Bloomberg News survey was for a 0.8 percent advance. Another report may show sales of new houses rose last month to a 300,000 annual rate, hovering near a record low. Dollar Index The Dollar Index increased 0.3 percent today to 77.945 as investors pared bets on how much Fed policy will debase the currency. IntercontinentalExchange Inc.’s gauge of the greenback against the currencies of six U.S. trading partners including the euro, yen and pound has climbed 2.2 percent since reaching 76.144 on Oct. 15, the lowest level since Dec. 11. The Fed is likely to announce a program of bond purchases worth a few hundred billion dollars over several months, the Wall Street Journal reported, without saying where it obtained the information. Officials want flexibility in the new program to gauge if it’s working, the Journal said. Estimates for the ultimate size of the asset-purchase program range from $1 trillion at Bank of America-Merrill Lynch to $2 trillion at Goldman Sachs Group Inc., with economists at both firms agreeing the Fed will likely start by announcing $500 billion after their Nov. 2-3 meeting. The dollar rose yesterday against the euro for the first time in three days on speculation an increase in debt purchases by the Fed will cause inflation to accelerate. Break-Even Rate The difference between yields on U.S. 10-year notes and inflation-linked debt, a gauge of consumer price expectations during the life of the maturity known as the break-even rate, rose to 2.20 percentage points, the highest since May 18. “Markets are signaling an outlook for increasing inflation,” Barclays Plc analysts led by Jordan Kotick in New York wrote in a research note to clients today. “This is likely to damp the broader trend of dollar weakness.” Norway’s krone fell against the dollar, declining 0.5 percent to 5.8936. The central bank left its benchmark deposit rate unchanged at 2 percent, as forecast by all 18 economists surveyed in a Bloomberg News survey. The bank, which last October became the first in Europe to scale back crisis easing, last raised rates on May 5. Drop in Aussie Australia’s currency dropped against all of its 16 most- traded counterparts tracked by Bloomberg after the Bureau of Statistics said the consumer price index rose 0.7 percent in the third quarter, compared with the 0.8 percent forecast by economists in a Bloomberg News survey. Swaps prices indicate a 15 percent chance the Reserve Bank of Australia will increase its 4.50 percent benchmark rate by a quarter-percentage point when policy makers meet in November, compared with 47 percent odds yesterday, according to a Credit Suisse Group AG index. The Aussie tumbled 1.4 percent to 97.20 U.S. cents and slid 1.1 percent to 79.33 yen. South Korea’s won fell 1 percent to 1,128.24 per dollar after the central bank said gross domestic product rose 0.7 percent in the third quarter from the previous three months, when it gained 1.4 percent. Malaysia’s ringgit slipped 0.3 percent to 3.1065 per dollar as Bank Negara Malaysia Governor Zeti Akhtar Aziz said in an interview with Bloomberg Television that policy makers don’t want to see “sudden movements.” The currency has appreciated more than 10 percent this year, a gain second only to the Thai baht among Asia’s most-traded currencies excluding the yen. To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Paul Dobson in London at pdobson2@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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