June 29 (Bloomberg) -- The dollar rose against the euro for the first time in three days after China said the U.S. currency may keep dominating global trade and it won’t alter its foreign- currency reserves suddenly. The dollar gained versus all 16 major currencies after Guan Tao, deputy head of the international payment department at the State Administration of Foreign Exchange, wrote in Chinamoney Magazine that the dollar may maintain its status as the world’s reserve currency. The yen fell against the dollar after a Japanese report showed retail sales slid for a ninth month, reducing the currency’s appeal as a refuge from the global slump. “The dollar will keep its role as reserve currency,” said Koji Fukaya, a senior currency strategist at the Tokyo unit of Deutsche Bank AG, the world’s biggest foreign-exchange trader. “China is unlikely to change the composition of its foreign- currency reserves any time soon. That’s dollar positive.” The dollar gained to $1.3995 per euro as of 7:46 a.m. in London from $1.4056 in New York on June 26. It rose to $1.6435 per British pound from $1.6525. The U.S. currency climbed to 95.41 yen from 95.18 yen. Japan’s currency rose to 133.43 per euro from 133.85. Guan’s article came after China’s central bank Governor Zhou Xiaochuan told reporters in Basel, Switzerland, yesterday that the nation’s “foreign exchange reserve policy is always quite stable.” China’s reserves policy is aimed at “liquidity, safety and returns,” Zhou said, easing concern overseas investors will shift away from the dollar. Dollar Index The Dollar Index, which tracks the currency against those of six major U.S. trading partners including the euro, yen and pound, gained 0.4 percent to 80.218. Chinese investors, the biggest foreign owners of U.S. Treasuries, cut holdings by $4.4 billion in April to $763.5 billion after Premier Wen Jiabao expressed concern about the value of dollar assets. “Countries are unlikely to desire a plunge in the dollar’s value as this would probably cause a shock to the markets, especially as China holds a lot of Treasuries,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. Weakening Yen The yen weakened versus the dollar after Japan’s Trade Ministry said retail sales dropped 2.8 percent in May from a year earlier and industrial production climbed 5.9 percent from April, when it had risen at the same rate. “We continue to see the yen trading in a range, but if economic fears resurface, benefits to the currency from risk aversion will be limited, nor is it a preferred currency to express a growth view,” Ashley Davies, a currency strategist in Singapore at UBS AG, wrote in a research note today. The yen is heading for a quarterly loss against 13 of the 16 major currencies, including a 13.5 percent decline versus the Brazilian real and a 13.2 percent slide against the South African rand. Losses in the euro may be tempered by speculation a European report will show consumer confidence improved, adding to signs the region’s central bank will keep interest rates unchanged at its July 2 meeting. “Euro-zone consumer confidence shows signs of bottoming out in March of this year,” said Robert Rennie, head of currency research at Westpac Banking Corp. in Sydney. “I wouldn’t be surprised to see another small lift from sentiment numbers in Europe,” and that may boost the euro, he said. The euro may strengthen to $1.4150 this week, Rennie predicted. Europe’s single currency headed for a 1.8 percent gain against the yen this quarter on optimism the recession in the 16-nation region is abating. European Confidence Consumer confidence in the euro area rose to minus 30 in June from minus 31 in May, and economic confidence climbed to 71 in June from 69.3 the previous month, Bloomberg News surveys of economists show. The European Commission in Brussels will release the reports today. Strategists who came closest to predicting the dollar’s value against the euro so far this year see it strengthening as much as 17 percent in the second half as the U.S. recovers from the recession faster than Europe. CIBC World Markets Plc, Deutsche Bank AG, Bank of America Corp. and Wells Fargo & Co. estimate the American currency will increase more than 4 percent by Dec. 31 after May ended with its sharpest three-month fall since 2002. At the start of the year, all had second-quarter forecasts within a penny or two of the $1.4056-per-euro close on June 26, Bloomberg’s currency survey shows. “In Europe, there’s a lot of headwinds, so the bullish- dollar story is based on what’s going on elsewhere,” said Adam Fazio, a CIBC currency strategist in New York. “We are bullish dollar in the near term.” Toronto-based CIBC forecasts a 4.1 percent increase in the next two quarters.

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