The dollar declined, trading at almost the lowest in a month, before Federal Reserve policy makers decide whether to reduce monetary stimulus at a two-day meeting starting today. The euro strengthened for a second day against the dollar and yen after an industry report showed German investor confidence climbed more than forecast, adding to evidence Europe’s largest economy is gaining momentum. India’s rupee fell the most in two weeks on speculation a reduction in U.S. stimulus may hurt demand for emerging-market assets. “The market has been pricing in tapering and it’s likely to come sooner or later,� Robert Lynch, a currency strategist at HSBC Holdings Plc in New York, said in a phone interview. “It’s reasonable to expect they’ll emphasize the difference between quantitative easing and interest-rate policies. They’ll maintain a strong emphasis on that.� The Bloomberg U.S. Dollar Index, which tracks the greenback against the performance of a basket of 10 major currencies, dropped 0.1 percent to 1,020.14 as of 11:05 a.m. New York time, after falling to 1,017.30 yesterday, the lowest level since Aug. 12. The dollar fell 0.1 percent to $1.3349 per euro after reaching $1.3386 yesterday, the weakest level since Aug. 28. The U.S. currency rose 0.3 percent to 99.36 yen while the 17-nation euro added 0.4 percent to 132.60 yen. Real Climbs Brazil’s real climbed 1 percent to 2.2614 per dollar, the strongest on a closing basis since July 26, after the nation’s central bank rolled over foreign-exchange swap contracts worth $1.97 billion to support the currency in an effort to curb inflation. Australia’s dollar advanced 0.4 percent to 93.57 U.S. cents after reaching 93.94 yesterday, the strongest since June 19. The New Zealand dollar climbed for a second day, gaining 0.8 percent to 82.39 cents. It touched 82.30 yesterday, the most since May 16. The rupee fell for the first time in three days before the Reserve Bank of India meets to review policy on Sept. 20. “Nobody really wants to take a view ahead of the Fed and RBI decisions,� said Vivek Chaturvedi, associate vice president for foreign exchange and derivatives at Ratnakar Bank Ltd. in Mumbai. “The rupee is in a delicate balance� after the recent gains, he said. Rupee Trade The rupee fell 0.8 percent to 63.37 per dollar, the biggest decline since Sept. 3. The currency has strengthened 3.7 percent this month. The ZEW Center for European Economic Research said its index of German investor and analyst expectations, which aims to predict economic developments six months in advance, rose to 49.6 in September from 42 in August. That’s the highest level since April 2010. “The German data has been helping the euro; Economic data has been stable enough to carry the currency,� Sireen Harajli, a strategist at Mizuho Bank in New York, said in a telephone interview. The JPMorgan G7 Volatility Index fell to 9 percent, the lowest in four months. It’s below the average 9.57 percent this year. The Federal Open Market Committee will decide to slow its monthly bond purchases to $75 billion from $85 billion this week, according to the median estimate of economists in a Bloomberg News survey on Sept. 6. The central bank cut its target for overnight bank lending to a range of zero to 0.25 percent in December 2008 as the financial crisis mounted, and has vowed to keep it there until the economy and employment show sustained signs of recovery. “People are staying on the sideline before the FOMC meeting,� Harajli said. “The Fed will probably reaffirm their forward guidance tomorrow that tapering isn’t tightening, interest rates are going to stay low.� The euro has gained 4.6 percent this year, the best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 3.3 percent, while the yen tumbled 11 percent. To contact the reporters on this story: Andrea Wong in New York at awong268@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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