The dollar declined against most of its major counterparts before the Federal Reserve holds a policy meeting today amid speculation officials will maintain their pledge to keep borrowing costs near a record low. The euro climbed from a two-month low against the greenback after the European bailout fund held its first auction of bills, attracting bids for more than three times the amount of securities that it sold. The 17-nation currency erased earlier losses versus the yen after a German report showed investor confidence unexpectedly increased for the first time in 10 months. India’s rupee weakened to a record low after manufacturing contracted for the first time since June 2009. “I don’t think there’s any question they’ll even hint about withdrawing stimulus� at the Fed meeting, said Neil Mellor, a strategist at Bank of New York Mellon Corp. in London. “It will underpin the elements in the equation that have kept the dollar weak. Looking forward to 2012, you cannot ignore the market’s desire to sell dollars.� The dollar weakened 0.1 percent to $1.3202 per euro and 77.85 yen at 7:56 a.m. New York time. The single currency was little changed at 102.77 yen after weakening 0.3 percent. It earlier fell to $1.3161, the least since Oct. 4. The Stoxx Europe 600 Index of shares rose 0.7 percent and futures on the Standard & Poor’s 500 Index climbed 0.6 percent. Yields on 10-year Treasuries climbed two basis points to 2.04 percent. Fed Policy Fed policy makers will keep their target rate in a range of zero to 0.25 percent at today’s gathering, according to a Bloomberg News survey. The European Financial Stability Facility sold 1.97 billion euros of 91-day bills at an average yield of 0.222 percent, the Bundesbank said today. The sale was its first fund-raising since European leaders agree on a closer fiscal accord and additional resources to combat the region’s debt crisis at a summit in Brussels last week. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, increased to minus 53.8 from a three-year low of minus 55.2 in November. Economists forecast a drop to minus 55.8, according to a Bloomberg News survey. Retail sales in the U.S. probably increased 0.6 percent last month after a 0.5 percent gain in October, a Bloomberg survey of economists showed before the Commerce Department releases the data today. Ratings Downgrades “The recent improvement in the U.S. economy has decreased the expectations for an expansion of QE into the mortgage- backed-securities market,� Emma Lawson, a currency strategist at National Australia Bank Ltd. in Sydney, wrote in a note to clients today. The euro earlier reached a two-month low against the yen amid concern European nations will have their credit ratings cut. It has fallen 1.6 percent in the past month, the most among 10 developed-nation currencies, according to Bloomberg Correlation-Weighted Indexes. The dollar has strengthened 2.9 percent, the best performance, and the yen has advanced 2 percent. The dollar dropped 0.5 percent against the Australian dollar today to $1.0124 and weakened 0.4 percent versus the South African rand to 8.2393 as investors sought higher-yielding assets before the meeting of Fed officials. The Dollar Index, which IntercontinentalExchange Inc. uses to track the U.S. currency against those of six trading partners, declined 0.1 percent to 79.466. The rupee declined 0.7 percent to 53.225 per dollar, after earlier touching a record low of 53.52. To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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