The dollar fell against a majority of its major peers as futures indicated a rally in U.S. stocks will buoy higher-yielding assets after the Federal Reserve this week said it may expand stimulus to revive a faltering recovery. The euro traded 0.7 percent from a five-month low against the yen as relative borrowing costs climbed for France signaling concern that the region’s debt crisis will spread. The yen pared gains and the Swiss franc weakened against the euro as officials indicated they may act to stem currency appreciation. The Australian dollar fell versus its New Zealand counterpart after a report showed the jobless rate unexpectedly rose. “Equity futures are still the key drivers for foreign- exchange markets and S&P futures are up, helping to see risk bid from the lows,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong. There is a “weakening in safe havens” such as the dollar, yen and franc, she said. The dollar fell to $1.4230 per euro as of 7:06 a.m. in London from $1.4178 in New York yesterday, when it climbed 1.4 percent. It weakened 0.3 percent to 76.65 yen from 76.86 yesterday, when it fell to as low as 76.35, near the post-World War II record of 76.25 that it touched on March 17. Against the euro, the yen traded at 109.03 from 108.97 yesterday after earlier reaching 108.27, its highest level since March 17. The franc fell to 0.7293 versus the dollar from 0.7292 yesterday, after reaching 0.7302 earlier. The franc dropped to 1.03775 per euro, from 1.03002 yesterday. S&P 500 Futures Standard & Poor’s 500 futures expiring in September rose 1.5 percent. That signals that the index may pare yesterday’s 4.4 percent drop which came as banks slumped on concern that Europe will fail to contain its debt crisis and that the U.S. economy is faltering. The Fed said Aug. 9 that officials “discussed the range of policy tools” to strengthen growth and are “prepared to employ these tools as appropriate” while pledging to keep the benchmark interest rate near zero until at least mid-2013. “The market is likely to keep pressing the Fed to come up with more accommodative policies amid a slowdown in the economy,” said Hitoshi Asaoka, senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest bank. “The market is concerned about some dollar weakness.” Initial claims for unemployment insurance payments in the U.S. rose with applications for benefits increasing 5,000 in the week ended Aug. 6 to 405,000, the Labor Department is forecast to say today according to a Bloomberg News survey of economists. Euro, Yen The euro held yesterday’s losses against the yen as investors demanded about 88 basis points, or 0.88 percentage point, of extra yield to buy 10-year French debt rather than German bunds, even though both carry AAA grades from the major rating companies. That spread is almost triple the 2010 average of 33 basis points. Yen gains were capped after Japanese Finance Minister Yoshihiko Noda said the currency’s movements have continued to be one-sided even after the government intervened on Aug. 4. He was speaking to lawmakers in parliament in Tokyo today. This month’s intervention, in which Japan may have spent a record amount, based on a projection of deposits held by financial institutions at the central bank, was Japan’s third after six years of a hands-off approach that ended in September 2010. Noda said the Aug. 4 action was unilateral. “There are enough comments coming out of Japanese officials to indicate that they’re still watching the dollar-yen rate like hawks and are ready to step in,” said Tim Waterer, a currency dealer at CMC Markets in Sydney. “The problem is when they do intervene in the market, the effects are very short- lived because the market is still looking for reasons to unwind riskier positions.” Swiss National Bank Swiss National Bank Deputy President Thomas Jordan was reported today to have said in an interview with Tages-Anzeiger that a temporary tie between the franc and the euro to curb the Swiss currency’s gains would be legal under the central bank’s mandate. Australia’s dollar fell 0.5 percent to NZ$1.2479 after the larger nation’s statistics bureau said the unemployment rate jumped to 5.1 percent in July from 4.9 percent a month earlier, the first increase since October. South Korean Won South Korea’s won slid toward its weakest in more than two months after the Bank of Korea held the benchmark seven-day repurchase rate at 3.25 percent. The Bank of Korea has raised the rate three times this year, by a quarter of a percentage point on each occasion, and the most recent increase was in June. BOK Governor Kim Choong Soo said on Aug. 9 the bank’s rate decisions are aimed at controlling inflationary expectations, rather than short-term price gains. The won weakened 0.3 percent to 1,082.85 per dollar. The currency touched 1,096.05 on Aug. 9, the weakest level since May 26. The yuan strengthened 0.36 percent to 6.3949 per dollar in Shanghai, breaching the 6.40 level for the first time since China unified official and market exchange rates at the end of 1993. The central bank raised its reference rate for the currency by 0.27 percent to 6.3991, the biggest advance since November. Customs bureau data released yesterday showed record exports helped drive China’s trade surplus to a two-year high in July. Consumer prices climbed 6.5 percent last month from a year earlier, the fastest pace in three years, according to official data. “The inflation and trade data, together with the Fed’s policy to maintain extremely low interest rates, have fueled faster appreciation,” said Banny Lam, an economist at CCB International Securities in Hong Kong. “Strong economic growth, supported by the latest export figures, also provides investors with confidence to buy the yuan in these turbulent times.” To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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