Dollar Trades Beyond $1.50 Versus Euro as Risk Demand Improves

Oct. 22 (Bloomberg) -- The dollar traded near a 14-month low versus euro as evidence of a global economic recovery damped demand for the U.S. currency as a safe haven.

The euro rise against 12 of its 16 major counterparts before reports forecast to show an index of U.S. leading indicators gained and German business confidence improved. The yen traded near a two-month low versus the euro after a report showed Japan’s exports fell at a slower pace in September, encouraging investors to seek higher-yielding assets overseas.

“People still feel safe in selling the dollar as the economy recovers,” said Toshiya Yamauchi, manager of the foreign-exchange margin-trading department at Ueda Harlow Ltd. in Tokyo. “Higher-yielding currencies, including the euro will benefit from this risk trade.”

The dollar traded at $1.5020 per euro at 9:33 a.m. in Tokyo from $1.5016 in New York yesterday when it touched $1.5046, the weakest level since August 2008. The U.S. currency fetched $1.6620 per pound from $1.6608 yesterday when it slipped to as low as $1.6637, the weakest level since Sept. 15.

The greenback was at 91.04 yen from 90.97 yen. The euro traded at 136.76 yen from 136.61 yen.

The Conference Board’s index of leading economic indicators increased 0.8 percent in September, according to the median forecast of 60 analysts in a Bloomberg survey. A sixth consecutive gain in the index would mark the best performance since 2004. The report from the New York-based group is scheduled for release at 10 a.m. in New York.

Ifo Index

Adding to signs that the economic recovery is gaining traction, the Ifo institute’s business climate index, based on a survey of 7,000 executives, climbed to 92 in October from 91.3 the previous month, according to a separate survey. The Munich- based institute will release the report tomorrow.

European industrial output rose for fourth month in August, climbing 0.9 percent from July, the European Union’s statistics office in Luxembourg said last week. European Central Bank council member Erkki Liikanen said on Finland’s YLE Radio Suomi this week the 16-nation euro area economy is no longer weakening.

“The euro-zone’s economy appears to be recovering more quickly than we’re seeing in the U.S. and Japan,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “The euro will likely gain further.”

ECB Policy

Traders maintained bets the ECB will keep its benchmark interest rate at 1 percent until the end of the first quarter next year. The implied yield on the three-month Euribor futures contract for March 2010 delivery was 1.07 percent yesterday, little changed from Oct. 20.

Reports from China today are forecast to show the world’s third-largest economy grew at a faster pace in the third quarter and industrial production rose in September.

The euro traded near a two-month high against the yen after government data showed Japan’s shipments abroad dropped 30.7 percent from a year earlier, compared with a 36 percent decline in August.

Japanese exporters are benefiting from a global trade rebound that’s being driven by interest-rate cuts and more than $2 trillion in government spending.