Dollar Falls for Fourth Day Against Euro as Risk Appetite Rises

By Ron Harui and Yoshiaki Nohara

June 30 (Bloomberg) -- The dollar weakened for a fourth day against the euro as Asian stocks advanced on speculation the global recession is easing, damping demand for the U.S. currency as a refuge.

The dollar declined against 13 of the 16 most-traded currencies before a U.S. report that economists say will show consumer confidence rose to a nine-month high, giving investors more confidence to buy higher-yielding assets. The yen rose from a two-week low against the euro on speculation investors reduced bets Japan’s currency will weaken before the Bank of Japan’s quarterly Tankan survey tomorrow.

“The U.S. report may be positive for the markets and more people are turning upbeat about green shoots,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s third-largest bank. “This would probably fuel risk-taking sentiment,” which may cause selling of the yen and the dollar, he said.

The dollar dropped to $1.4107 per euro as of 6:45 a.m. in London from $1.4083 in New York yesterday. The U.S. currency declined to $1.6624 per pound from $1.6567 after sliding to $1.6661, the weakest since June 3.

The yen rose to 135.14 per euro from 135.31, after earlier falling to 135.96, the lowest level since June 15. Japan’s currency climbed to 95.82 per dollar from 96.06.

The Nikkei 225 Stock Average gained 1.9 percent and the MSCI Asia-Pacific Index of shares rose 1.2 percent. The VIX Index, a measure of market volatility known as Wall Street’s fear gauge, slid to 25.35 yesterday, the least since September, when Lehman Brothers Holdings Inc. went bankrupt. The index suggests traders are becoming less pessimistic about stocks.

‘Risk Appetite’

“Risk appetite is on the menu,” said Alex Sinton, a senior dealer in Auckland at ANZ National Bank Ltd., New Zealand’s largest financial-services company. “At this point, people are comfortable taking on board risk.”

The dollar weakened for a third day against the pound on optimism the global slump is waning, reducing the U.S. currency’s appeal as a refuge.

Confidence among U.S. consumers rose to 55.3 in June, the highest since September 2008, from 54.90 in May, according to a Bloomberg News survey of economists. The Conference Board will release the sentiment index at 10 a.m. in Washington.

The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, declined 0.3 percent to 79.679.

‘Getting Cautious’

The yen reversed earlier losses against the dollar and the euro before Japan’s Tankan report.

“Market participants are probably getting cautious ahead of tomorrow’s Tankan,” said Ryohei Muramatsu, manager of Group Treasury Asia in Tokyo at Commerzbank AG, Germany’s second- largest bank. “They’re likely closing short-yen positions.” A short position is a bet an asset will decline.

The Tankan survey will show an index of sentiment among large manufacturers rose to minus 43 from a record low of minus 58 in March, according to a Bloomberg News survey of economists. A negative number means pessimists outnumber optimists.

Futures traders cut their bets the yen will decline against the dollar, figures from the Washington-based Commodity Futures Trading Commission showed on June 26.

The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen compared with those on a gain -- so-called net shorts -- was 4,007 on June 23, compared with net shorts of 8,563 a week earlier.

The euro gained versus the dollar on speculation ECB council member Ewald Nowotny will today signal the central bank will keep interest rates on hold into next year to aid an economic recovery. Nowotny will speak at 11 a.m. in Vienna.

European Confidence

European economic confidence rose more than economists forecast in June, the European Commission in Brussels reported yesterday, signaling the region’s slump is abating. Consumer sentiment in the euro zone rose to minus 25 in June from a revised minus 28 in May, and a measure of manufacturers’ confidence rose to minus 32 from a revised minus 33.

“There’s improving sentiment in the euro-zone,” said Lee Wai Tuck, a currency strategist at Forecast Ltd. in Singapore. “Our view is that the ECB will keep rates at 1 percent for the foreseeable future. It looks like the euro can try the upside.”

Fellow ECB member Axel Weber said last week the central bank has used up its scope to cut rates. Policy makers will leave the benchmark rate unchanged at this week’s meeting, according to the median estimate of economists surveyed by Bloomberg News.

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 U.S. currency will rise more than 4 percent by Dec. 31 after May ended with its steepest 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.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.