The dollar fell against the euro a second day on speculation the worst of the banking crisis may be over, reducing the demand for the greenback as a refuge. South Korea’s won rose for a fourth day, the longest stretch this year, as concern eased that the country may be starved of dollar funding as global credit markets tighten. The euro rose against the yen as demand for higher-yielding assets outweighed a government report showing factory orders in Germany slid 8 percent in January, four times more than economists forecast. “Risk appetite seems to be holding up,” said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. “The dollar remains a little better offered. The fact that the euro has ignored some very weak German orders data this morning also suggests that this is a market that is looking to put on risk again.” The dollar fell 0.6 percent to $1.2762 per euro at 10:15 a.m. in New York, from $1.2682 yesterday. The yen was little changed at 125.29 per euro, after rising as much as 0.5 percent, from 125.13. The yen rose 0.5 percent to 98.17 per dollar from 98.67 yesterday. The Dollar Index, which the ICE uses to track the currency’s performance against those of six major U.S. trading partners, fell 0.9 percent to 88.134, from 88.927 yesterday. The index rose to 89.624 on March 4, the strongest since April 2006. Won’s Gains South Korea’s won advanced 2.7 percent to 1,471 per dollar, according to Seoul Money Brokerage Services Ltd., as stocks in Asia climbed. The currency, which last week reached an 11-year low of 1,597, jumped 5 percent in the past four days. A memo yesterday by Citigroup Inc. Chief Executive Officer Vikram Pandit saying the bank is having its best quarter since 2007 suggests some signs of “an easing of the credit crisis,” said Osamu Takashima, chief foreign-exchange analyst at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest financial group. “Such signs are positive for currencies of emerging markets.” The Standard & Poor’s 500 Index gained 1 percent, while the MSCI World Index of shares advanced 1.7 percent. The S&P 500 surged 6.4 percent yesterday, the most since November. “With equities following through to yesterday’s strong rally,” there is “the risk of a deeper short-term corrective phase for the dollar,” Niall O’Connor, New York-based currency technical analyst at JPMorgan Chase & Co., wrote in a research note to clients. The Norwegian krone and the Swedish krona “continue to lead the way for this week’s trade as the outperformance” against the dollar and the euro, O’Connor wrote. Krone Versus Dollar Norway’s krone is the only one among the major currencies beating the dollar this year, rising 0.5 percent to 6.9153. Against the euro, it gained 10 percent this year to 8.8234. A break below the key 8.89 and 8.86 “support area” in the euro versus the krone suggests “a retest, if not break of 8.65, 8.62 lows, he wrote. “The dollar is expected to be on the back foot,” said Sacha Tihanyi, a Toronto-based currency strategist at Scotia Capital Inc., a unit of Canada’s third-biggest bank. “The banking sector is the crust of this crisis. If we see more signs of improvement, that’s good for equities and that will ease the downward pressure for the euro-dollar.” Foreign-exchange volatility, a measure of risk implied by option prices, was close to a five-month low, according to an index compiled by JPMorgan Chase & Co. Options traders see currencies of the Group of Seven industrialized nations fluctuating by an annualized 17 percent in the next three months, compared with 27 percent on Oct. 24, which had been the most since the index started in 1992. Confidence Survey Expectations for the yen to strengthen in the next six months plunged after Japan’s economy contracted last quarter by the most in more than three decades, a survey of Bloomberg users showed. Participants are the least bullish on the yen since August, as an index measuring sentiment plunged 26 percent this month, according to 3,637 respondents from Paris to Tokyo in the Bloomberg Professional Global Confidence Index. Swiss users were the most optimistic on the franc since the surveys started. The yen is off to its worst start against the U.S. dollar since at least 1988 as the economic contraction ends a rally sparked by investors seeking a refuge from the global financial crisis. Japan’s gross domestic product shrank at an annual 12.7 percent pace in the fourth quarter, while its trade deficit widened in January to the most in more than two decades as exports plunged 46 percent, the government said last month. ‘On the Chin’ “The Japanese economy has taken it on the chin,” said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut, a survey participant. “The numbers out of Japan have been just horrific.” The dollar gained against all 16 major currencies in the past month as deepening global recession boosted the demand for the world’s reserve currencies. Companies also tend to hoard dollars to secure their borrowing needs. The cost of borrowing in dollars is rising as the global recession deepens and central bank efforts to prop up the financial system fail to prevent a growing number of banks from requiring government bailouts. The London interbank offered rate, or Libor, that banks say they charge each other for three-month loans held steady at 1.33 percent, near the highest level since Jan. 8 and up from the low this year of 1.08 percent on Jan. 14, the British Bankers’ Association said. The Libor-OIS spread, a gauge of bank reluctance to lend, increased to the most since Jan. 9.

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