Dollar Falls Versus Euro as Recovery Signs Spur Risk Demand

Oct. 1 (Bloomberg) -- The dollar declined against the euro for a second day as growing evidence of the global economic recovery stokes demand for higher-yielding assets.

The greenback extended its two-quarter decline against Europe’s single currency on speculation a report today will show China’s manufacturing expanded for a fourth month. The yen retreated against the euro after the International Monetary Fund cut its projection for writedowns on loans and investments.

“China is showing steady signs of growth, boosting demand for assets in emerging markets and weighing on the dollar,” said Toshiya Yamauchi, a Tokyo-based manager of the foreign- exchange margin trading department at Ueda Harlow Ltd. “The dollar will continue to be sold for a while.”

The dollar traded at $1.4654 per euro at 8:55 a.m. in Tokyo from $1.4640 in New York yesterday. The euro was at 131.77 yen from 131.33 yen. The dollar bought 89.91 yen from 89.70. It fell as low as 88.24 on Sept. 28, the weakest level since January.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the U.S. currency versus six counterparts including the euro and yen, fell 0.53 percent to 76.712 yesterday. It traded at 76.654 today.

Economists in a Bloomberg News survey said China’s Purchasing Managers’ Index gained to 55 in September from 54 in August. The Federation of Logistics and Purchasing is set to report the data at 9 a.m. today in Beijing.

Tankan Survey

The Bank of Japan’s Tankan survey today showed an index of confidence among large manufacturers improved to minus 33 from minus 48 in June, matching the median estimate of economists in a Bloomberg News survey. A negative number means pessimists outnumber optimists.

The dollar’s share of global currency reserves fell in the second quarter to 62.8 percent, from 65 percent in the first three months of the year, an IMF report showed yesterday. The euro’s share rose to 27.5 percent from 25.9 percent.

The IMF cut its projection for global writedowns on loans and investments by 15 percent to $3.4 trillion, citing in its semiannual report improvements in credit markets and signs of economic growth.

Tight credit, low inflation and slack demand for labor and products mean the Federal Reserve can keep interest rates at around zero “for an extended period,” Fed Vice Chairman Donald Kohn said in Washington yesterday.