Dollar Near Two-Week Low as Stock Gains Reduce Safety Demand

July 16 (Bloomberg) -- The dollar traded near a two-week low against the euro as Asian stocks extended a global equity rally, encouraging investors to buy higher-yielding assets.

The yen was near the lowest in a week versus the 16-nation currency before a U.S. report that economists said will show job losses in the world’s largest economy slowed last week, adding to signs the worst of the recession may be over. The Australian dollar rose the most in a month yesterday before a Chinese government report today that may show economic growth increased, boosting demand for the currencies of resource-rich nations.

“The recent slew of economic data and incoming indicators seem to suggest that the situation is not as bad as the market had feared,” said Kengo Suzuki, manager of the foreign bond department in Tokyo at Mizuho Securities Co., a unit of Japan’s second-largest banking group. “This will put downward pressure” on the yen and the dollar.

The dollar traded at $1.4099 per euro at 9:16 a.m. in Tokyo from $1.4107 yesterday in New York, when it fell to $1.4135, the weakest level since July 2. The yen was at 133.04 per euro from 132.95 yesterday when it declined 1.8 percent, the most since May 28. The yen bought 94.36 versus the dollar from 94.23.

Australia’s currency traded at 80.24 U.S. cents from 80.32 cents in New York yesterday, when it gained 1.3 percent, the biggest advance since June 11.

The Nikkei 225 Stock Average advanced 2.2 percent and the MSCI Asia Pacific Index of regional shares climbed 1.3 percent.

Jobless Claims

U.S. initial jobless claims fell to 553,000 in the week ended July 11 from 565,000 the previous week, according to the median forecast of economists surveyed by Bloomberg News. The Labor Department report is due at 8:30 a.m. in Washington.

China’s economy may have expanded 7.8 percent in the second quarter, compared with a 6.1 percent growth in the previous three months, as record lending and surging investment drove a rebound from the weakest growth in almost a decade, according to a Bloomberg News survey of economists.

Asia’s second-largest economy grew 7.9 percent in the second quarter, the Beijing Times newspaper reported today, citing an unidentified person who in turn cited an official with the national statistics bureau. The economy grew 7.1 percent in the first half, the newspaper said.

CIT Group

Losses in the dollar and the yen may be tempered after CIT Group Inc., the commercial lender running short of cash, said yesterday it probably won’t receive a federal bailout and is studying alternatives with advisers.

“There is no appreciable likelihood of additional government support being provided over the near term,” the New York-based company said in a statement. CIT, once the biggest independent commercial lender, faces bankruptcy if no federal aid emerges, Standard & Poor’s said earlier this week.

“The commercial lender may go bankrupt,” said Toshihiko Sakai, head of trading for foreign exchange and financial products in Tokyo at Mitsubishi UFJ Trust and Banking Corp., a unit of Japan’s largest bank. “The government may perceive there’s not much need to provide financial aid. This may cause buying of the yen and the dollar as safe-haven currencies.”