Dollar Trades Near 14-Month Low Amid Increasing Risk Appetite

Oct. 14 (Bloomberg) -- The dollar traded near a 14-month low against the euro as signs the global economy is recovering spurred demand for higher-yielding assets.

The dollar may decline against the pound for a second day before a government report forecast to show U.S. consumer prices gained last month, curbing demand for safe-haven assets. The yen weakened against the greenback on speculation the Bank of Japan will keep interest rates unchanged today amid the nation’s fragile economic outlook.

“Globally, things are improving,” said Phil Burke, chief dealer for foreign-exchange spot trading at JPMorgan Securities in Sydney. “Risk will be supported, and the U.S. dollar will probably weaken.”

The U.S. currency traded at $1.4846 per euro at 8:59 a.m. in Tokyo from $1.4854 in New York yesterday, when it reached $1.4876, the weakest level since Aug. 22, 2008. The yen was at 133.37 per euro from 133.26. The yen fell to 89.84 per dollar from 89.71. The dollar was at $1.5937 per pound from $1.5925.

The dollar may weaken as economists in a Bloomberg News survey forecast U.S. consumer prices rose 0.2 percent in September following a 0.4 percent gain in August. The Labor Department is set to release the data tomorrow.

Japan’s central bank will leave its benchmark interest rate at 0.1 percent today, according to all 20 economists surveyed by Bloomberg News. The nation’s producer prices fell for a ninth month in September as oil traded lower than last year’s levels and demand for materials waned, the Bank of Japan said today.

The costs companies pay for energy and unfinished goods declined 7.9 percent in September from a year earlier after sliding a record 8.5 percent in August. The median estimate of 27 economists surveyed by Bloomberg News was for a 7.9 percent drop.

Bank of Japan

“The central bank won’t be able to raise rates anytime soon as deflation concerns linger,” said Toshiya Yamauchi, a Tokyo-based manager of the foreign-exchange margin trading department at Ueda Harlow Ltd. “This makes it easy for the yen to be sold as a funding currency.”

Japan’s consumer prices excluding fresh food slid 2.4 percent in August from a year earlier, topping July’s 2.2 percent decline, the statistics bureau said on Sept. 29. The drop was the sharpest since the survey began in 1971.

Federal Reserve Vice Chairman Donald Kohn said yesterday that inflation and growth will probably stay below the central bank’s objectives for some time, warranting very low interest rates for an “extended period.” The bank is scheduled to release the minutes of its Sept. 23 meeting today in Washington.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, dropped 0.1 percent to 75.877.