The dollar dropped against all of its most-traded counterparts after China repeated its call for a “super-sovereign” currency. The greenback headed for its biggest weekly loss against the euro in a month after the People’s Bank of China said the International Monetary Fund should manage part of members’ foreign-exchange reserves. China is the biggest foreign holder of U.S. Treasuries, with $763.5 billion in April. “The concern of reserve diversification is always lurking in the background,” said Martin McMahon, a foreign-exchange analyst at Credit Suisse Group AG in Zurich. The dollar weakened 0.8 percent to $1.4101 per euro at 8:34 a.m. in New York, from $1.3988 yesterday, extending its loss this week to 1.1 percent. The dollar will decline to a level between $1.50 and $1.60 euro in the third quarter, McMahon said. The yen weakened 0.3 percent to 134.59 per euro from 134.22. The U.S. currency fell 0.5 percent to 95.44 yen from 95.95. The Dollar Index, which the ICE uses to track the greenback against the currencies of six leading trading partners, fell 0.8 percent to below 80. “To prevent the deficiencies in the main reserve currency, there’s a need to create a new currency that’s delinked from the economies of the issuers,” the People’s Bank of China said in a review of the economy in 2008 released today. People’s Bank Governor Zhou Xiaochuan urged the IMF in March to expand the functions of its unit of account and move toward a “super-sovereign reserve currency.” Russian President Dmitry Medvedev proposed on June 5 that nations use a mix of regional reserve currencies to reduce reliance on the dollar. ‘Signs of Tensions’ China called on the U.S. to guarantee the safety of its assets in March, when Premier Wen Jiabao said the nation was “worried” about its holdings of Treasuries. “There may be signs here of tensions mounting between the PBOC’s economic concerns over China’s holdings of dollars and the Chinese government’s diplomatic reasons for doing so,” Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London, wrote in an e-mail message. Japan’s Nikkei 225 Stock Average rose 0.8 percent, climbing for a third day, and the Dow Jones Stoxx 600 Index of European shares advanced 0.2 percent. “Gains in stocks are pumping capital into markets,” said Masaki Fukui, a senior market economist in Tokyo at Mizuho Corporate Bank Ltd., Japan’s second-largest publicly traded lender by assets. “The recent risk aversion strengthened the dollar as a refuge, but as risk appetite rebounds, higher- yielding currencies seem to be benefiting.” U.S. consumer spending increased 0.3 percent last month after no change in April, the Commerce Department reported today. The gain matched the median forecast of 76 economists surveyed by Bloomberg News.

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