The Dollar Index advanced for the third time in four days amid speculation the Federal Reserve will announce further stimulus measures for the world’s biggest economy following a two-day policy meeting. The yen approached its postwar high versus the dollar as concern the global economy is slowing stoked haven demand. The pound fell to an eight-month low against the dollar after Bank of England minutes showed officials considered adding stimulus to the economy. Norway’s krone slid versus most of its peers on bets the central bank will leave its main rate unchanged. The Fed will replace short-term Treasuries in its portfolio with longer-term bonds, according to a Bloomberg survey. “Unless they surprise the market by announcing an increase in the absolute size of their portfolio, the dollar could benefit” from the Fed’s actions, said Kit Juckes, head of foreign-exchange research at Societe Generale SA in London. The Dollar Index, which measures the greenback against the currencies of six U.S. trading partners, rose 0.3 percent to 77.213 at 6:59 a.m. in New York, less than one percent below an almost seven-month high reached Sept. 12. The dollar was 0.2 percent stronger versus the euro at $1.3664. The yen rose 0.2 percent to 76.33 per dollar, after earlier reaching 76.12, the strongest since Aug. 19, when it reached a post World War II record of 75.95. The euro fell 0.5 percent to 104.28 yen. U.S. Stimulus Analysts are expecting the Fed to announce further monetary stimulus measures to lower the cost of long-term mortgages in a bid to spark a rebound in the U.S. housing market, seen as essential to restore the net worth of the nation’s consumers. “The dollar has been undermined by quantitative easing because it has caused a huge drop in short-term yields,” said Juckes. “This time round it could drive shorter-dated yields higher which at the margin is likely to be dollar positive.” The Fed, by announcing today the lengthening in the average duration of bonds in its portfolio, would mimic a policy in 1961 known as “Operation Twist” for its goal of bending the yield curve. Within the first month, the program may push down the yield on the 10-year Treasury security by 0.15 percentage point, said Chris Rupkey, chief financial economist of Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. The Swiss franc fell versus the euro on speculation that the Swiss National Bank may reset the 1.20-franc ceiling against the shared European currency that it imposed on Sept. 6. Franc Floor “The Swiss franc sold off on expectation that the SNB may move the euro-franc floor higher,” Emma Lawson, a Sydney-based currency strategist at National Australia Bank Ltd. wrote in a note to clients today. The franc lost 0.6 percent to 1.2227 per euro after reaching 1.2327, the weakest since July 5. It fell 0.8 percent to 89.49 centimes per dollar, after touching 89.87 centimes, the weakest level since April 20. Swiss central bank spokesman Walter Meier in Zurich declined yesterday to comment when asked about speculation that policy makers may adjust the franc ceiling against the euro. The EU said a second round of talks with Greek Finance Minister Evangelos Venizelos and the IMF aimed at staving off default made “good progress.” The statement said a “full mission” will return to Athens next week. ‘Torturous’ Negotiations Prime Minister George Papandreou’s government is trying to show it can reach budget targets required for the next 8 billion euro payment from a bailout engineered in 2010. “The fact that the negotiations are ongoing and, torturous though they may be, they probably will get their 8 billion to keep them funded in October,” said Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp., Australia’s second-largest lender. “That’s making it difficult for the euro to move sharply lower near term.” Callow advised that investors sell the currency if it gains above $1.38. The euro has depreciated 1.8 percent in the past month, the worst performer after the Swiss franc’s 10 percent drop among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar has appreciated 4.1 percent while the yen has gained 4.4 percent. The IMF said yesterday the world economy will expand 4 percent this year and next, compared with June forecasts of 4.3 percent in 2011 and of 4.5 percent in 2012. ‘Old Safe-Haven’ The yen rose to as high as 76.12 per dollar after breaking through so-called resistance near 76.35, according to Junichi Ishikawa, a Tokyo-based market analyst at IG Markets Securities Ltd. The yen later pared gains on concern the Bank of Japan will sell the currency, he said. “In this environment where the global economy is turning down and the Japanese data are not that weak, it’s likely the yen will strengthen,” said Thomas Harr, head of Asian currency strategy at Standard Chartered Plc in Singapore. “If the Bank of Japan does not intervene, it’s the old safe-haven currency.” Japanese Finance Minister Jun Azumi told reporters in Tokyo today he’s closely watching markets and will take “bold” action on currencies if needed. The pound slid versus most of its major peers after minutes of the Bank of England’s most-recent meeting showed policy makers said growth in the second half of 2011 may be “materially weaker” than projected in August. The central bank kept its key rate at a record low of 0.5 percent in September and maintained bond purchases at 200 billion pounds ($314 billion). The pound fell 0.5 percent to $1.5660 after reaching $1.5614, the weakest since Jan. 12. It was 0.2 percent weaker at 87.25 pence per euro, snapping a three-day advance. Norway’s krone weakened versus all but one of its 16 major peers on bets the central bank will keep its benchmark interest rate unchanged at 2.25 percent for a third consecutive meeting. The krone lost 0.9 percent to 5.6809 per dollar. To contact the reporters on this story: Garth Theunissen in London gtheunissen@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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