By Anchalee Worrachate and Ron Harui Sept. 21 (Bloomberg) -- The dollar rose to a one-week high against the yen before this week’s Federal Reserve meeting and a report today forecast by economists to show leading indicators gained for a fifth month. The U.S. currency advanced against all but 3 of its most- traded counterparts tracked by Bloomberg, rising for a second day versus the euro. The difference in yield between 10-year Treasuries and comparable Japanese government bonds, known as JGBs, widened to 212 basis points, from 207 basis points at the start of the month. “Investors are keen to see to what extent the Fed will acknowledge the improvement in the recent economic data, and the market might be positioning for that,” said Henrik Gullberg, a currency strategist in London at Deutsche Bank AG. “The yield spread between the Treasuries and JGBs has widened, and that tends to be supportive of the U.S. currency as well.” The dollar rose 1.1 percent to 92.27 yen at 7:25 a.m. in New York, from 91.29 yen on Sept. 18, after reaching 92.36, the highest level since Sept. 9. The dollar strengthened 0.4 percent to $1.4659 per euro, from $1.4712. The yen declined to 135.31 per euro, the weakest level since Aug. 25, before trading at 135.23, compared with 134.33 last week. The pound slid 0.6 percent to $1.6180. The Dollar Index, which the ICE uses to track the greenback against the currencies of six major U.S. trading partners, rose 0.5 percent to 76.841. It’s fallen 5.5 percent this year. The Fed will keep its target rate for overnight loans in a range of zero to 0.25 percent at its two-day policy meeting starting tomorrow, according to all 91 economists surveyed by Bloomberg News. Fed Meeting Fed Chairman Ben S. Bernanke and his colleagues may continue talking this week at the Federal Open Market Committee meeting about how to wind down purchases of mortgage-backed securities, according to Peter Hooper, chief economist at Deutsche Bank Securities Inc. in New York. The two programs have helped stabilize real-estate demand, with new-house sales rising 9.6 percent in July from the prior month, the most since 2005. Bernanke said in Washington on Sept. 15 that the worst U.S. recession since the 1930s has probably ended. The central bank decided in August to end purchases of up to $300 billion in Treasury debt next month. “There might be a little bit of nervousness going into the FOMC if they start signaling any potential unwind of quantitative easing,” Tony Morriss, senior markets strategist in Sydney at Australia & New Zealand Banking Group Ltd., said in a Bloomberg Television interview. “There is a bit of risk over the next couple of days of the dollar starting to recover a little bit of ground.” Leading Indicators The Conference Board’s gauge of the U.S. economic outlook for the next three to six months rose 0.7 percent in August, after a 0.6 percent gain in July, a Bloomberg survey showed before the New York-based group releases the report today. The world’s biggest banks say the Japanese currency is likely to weaken. Japan will be the only Group of 10 nation that won’t raise borrowing costs in 2010, keeping its benchmark interest rate at a record low of 0.1 percent, according to the median forecast of 40 estimates in a Bloomberg survey. New York-based Goldman Sachs Group Inc., which earned more than $100 million from trading for a record 46 days last quarter, predicts the yen will weaken to 98 per dollar and 142 per euro by the end of the year. Financial markets in Japan are closed for a holiday today, tomorrow and the next day. The pound may weaken further against the dollar and the euro on speculation the Bank of England will keep borrowing costs at a record low, according to BNP Paribas SA. BOE Rate BOE Governor Mervyn King told lawmakers in London last week that cutting the deposit rate paid to financial institutions is “something we’re looking at.” Banks are currently paid 0.5 percent on the deposits. While the U.K. central bank is boosting its reserves by buying 175 billion pounds of bonds through so- called quantitative easing, King said he doesn’t want it to go too far. “Sterling will be hit by the BOE keeping interest rates low, continuing to purchase gilts in the open market via an expansion of its balance sheet,” analysts led by Hans-Guenter Redeker, London-based global head of currency strategy at BNP Paribas, wrote in a research note dated yesterday. “We have revised our pound projections lower.” BNP now expects the pound to decline to $1.57 by the end of this year, compared with $1.53 previously. The French bank also forecasts the pound to fall to 98 pence per euro by year-end, versus a prior prediction of 88 pence. The pound dropped 0.2 percent to 90.59 pence per euro, after earlier touching 90.78 pence, the weakest level since April 24.

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