The dollar fell as an equity rally signaled renewed demand for higher-yielding assets, while Japan’s yen stayed near a dollar record amid speculation policy makers may move to weaken the currency. The Swiss franc slid after central bank Vice President Thomas Jordan said a temporary peg to the euro would be legal. China’s yuan strengthened beyond 6.4 per dollar for the first time in 17 years. Europe’s benchmark Stoxx 600 Index rallied 2 percent after sliding to a two-year low yesterday, while Standard & Poor’s 500 Index futures climbed. The greenback has fallen for a fifth day against the yen, its longest run of daily declines since June 8. “There’s been some enthusiasm for equities and a better tone for stock market futures,” said Jane Foley, a senior foreign-exchange strategist at Rabobank International in London. “That’s soothed sentiment and offered a respite for risk assets. That’s weighing on the so-called safe-haven currencies,” she said, referring to the dollar, yen and franc. The dollar fell 0.5 percent to $1.4250 per euro at 9:56 a.m. in London from $1.4178 in New York yesterday, when it climbed 1.4 percent. The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, slipped 0.2 percent to 74.464. The yen was 0.4 percent stronger at 76.55 per dollar. The yen slid for about 10 minutes at 8:20 a.m. London time before renewing its gains. The Japanese currency reached 76.31, near the post-World War II record high of 76.25 that it touched on March 17. Franc Speculation “The move in dollar-yen may be down to position adjustments,” said Neil Jones, the head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. “The market is running with risk-aversion type positions. There’s a high level of nervousness over official activity. Position adjustment happens in an instant, so the market may be prone to these sharp moves as traders don’t want to be caught out.” The franc fell 1.5 percent to 73.77 centimes per dollar. The Swiss currency dropped 2 percent to 1.0105 per euro. “Any temporary measures to influence the exchange rate are permissible under our mandate as long as these are consistent with long-term price stability,” SNB’s Jordan said in an interview with Tages-Anzeiger. “I think the SNB are considering all options,” said Lauren Rosborough, a senior strategist at Westpac Banking Corp. in London. “It certainly makes sense that the SNB want to weaken the Swiss franc in order to stem deflation risks in their economy.” Stock Moves S&P 500 futures expiring in September rose 1.7 percent, signaling the index may pare yesterday’s 4.4 percent drop. Stocks tumbled yesterday 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.” Yuan Strengthens 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. The yuan strengthened 0.4 percent to 6.3937 per dollar in Shanghai, breaching 6.40 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, data showed. “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.” Yen ‘One-Sided’ 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.” Australia’s currency rose for the second time in 11 days against its U.S. counterpart, even after a report showed the nation’s jobless rate increased by the most since October. Australian unemployment jumped to 5.1 percent in July from 4.9 percent a month earlier, the first increase since October. The number of workers fell by 100 after a revised 18,200 gain in June. That compares with the median estimate for 10,000 additional jobs in a Bloomberg News survey of 25 economists. Australia’s dollar rose 1 percent to $1.0279 from $1.0178 yesterday and traded 0.5 percent weaker at 78.62 yen. To contact the reporters on this story: Keith Jenkins in London at kjenkins3@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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