July 20 (Bloomberg) -- The dollar dropped to a six-week low against the euro while the yen slid after stocks gained amid speculation CIT Group Inc. will avoid bankruptcy, encouraging higher-yield demand. New Zealand’s dollar climbed versus its U.S. counterpart to the strongest level since June 2 and the Canadian currency advanced after commodity prices rose. The pound climbed the most in more than a week as a report showed asking prices for U.K. homes increased this month. “People are looking for risk assets, not with a lot of conviction, but with equities there is some appetite,” said Brian Kim, a foreign-exchange strategist in Stamford, Connecticut, at UBS AG, the world’s second-largest currency trader. “They’re leaning away from safe havens, and the dollar and yen kind of suffered.” The U.S. currency declined 0.9 percent to $1.4232 per euro at 4:12 p.m. in New York, from $1.4102 on July 17. It reached $1.4249, the weakest level since June 5. The yen depreciated 0.9 percent to 134.10 per euro from 132.85 after trading at 134.76, the weakest level since July 3. Japan’s currency traded at 94.26 versus the dollar, compared with 94.19. The Dollar Index, which the ICE uses to track the greenback against the currencies of six major U.S. trading partners, touched 78.799, the weakest level since June 3. The index, which reached the highest in almost three years on March 4 and the lowest in 2009 on June 2, traded in a range of about 1.5 points above or below 80 since the beginning of last month. ‘Degree of Caution’ “The market is not outside the range,” said Jonathan Gencher, director of foreign-exchange sales at Bank of Montreal in Toronto. “Risk appetite is there, but the market is trading with a degree of caution.” The prospects for the “risk rally” are uncertain because economic data are starting to show a “downshifting” trend, currency strategists at Citigroup Inc. including New York-based Todd Elmer wrote in a research note today. A Citigroup index measuring economic surprises in major economies decreased to 31 on July 17 from 51 a month ago. The gauge gives a positive reading when economic data surpasses economists’ expectations. The Conference Board’s gauge of the economic outlook for the next three to six months increased 0.7 percent after a revised 1.3 percent gain in May, the New York-based research group said today. The median forecast of 59 economists surveyed by Bloomberg News was for a 0.5 percent advance. Yen Versus Kiwi The yen weakened versus all of the 16 most-traded currencies tracked by Bloomberg, dropping 1.9 percent to 61.89 versus the New Zealand dollar and decreasing 1.6 percent to 76.83 against Australia’s currency on speculation investors will step up carry trades, in which they borrow in a country with low interest rates and buy assets where returns are higher. Benchmark interest rates are 2.5 percent in New Zealand and 3 percent in Australia, compared with 0.1 percent in Japan and as low as zero in the U.S. The board of the New York-based lender CIT approved yesterday a $3 billion loan for at least 2.5 years from a group of its bondholders, and the company plans to announce an agreement as soon as today, said a person familiar with the situation. The funds would give CIT a chance to restructure its debt outside bankruptcy, said a second person. Both people declined to be identified because the talks are confidential. The yen and dollar also weakened before U.S. companies such as Boston-based State Street Corp. report earnings this week. Standard & Poor’s 500 Index firms that have announced results since July 8 topped estimates by an average of 15 percent, according to data compiled by Bloomberg. JPMorgan’s View Investors should sell the U.S. dollar against the Canadian dollar, the Hungarian forint and pound as higher-than-expected corporate earnings encourage the purchase of riskier assets, according to JPMorgan Chase & Co. JPMorgan expects companies on the S&P 500 Index to beat consensus earnings per share by at least 4 percent this quarter, John Normand, head of global foreign-exchange strategy in London at the firm, wrote in a note July 17. Since 2006, earnings increased more than forecast in seven quarters by an average of 5 percent, he wrote. Six of those periods saw “S&P rallies averaging 5 percent and trade-weighted dollar declines averaging 2.3 percent,” he wrote. The S&P 500 Index advanced 1 percent today, closing at the highest level since November. The pound rose as much as 1.4 percent to $1.6547 against the dollar in the biggest intraday gain since July 9 as Rightmove Plc, operator of the U.K.’s biggest residential property Web site, said the average cost of a home increased 0.6 percent this month after falling 0.4 percent in June. Commodity Gains New Zealand’s dollar increased as much as 2.1 percent to 65.80 cents, the highest level since June 2, as the Reuters/Jefferies CRB Index of 19 raw materials rose for a sixth day, gaining 1.2 percent. Commodities make up half of New Zealand’s export revenue. The Canadian currency advanced as much as 1 percent to C$1.1020, the strongest level since June 12, after crude oil, the nation’s biggest export, rose as much as 2.1 percent to $64.90 a barrel. To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Sapna Maheshwari in New York at smaheshwar11@bloomberg.net

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