By Matt Townsend and Anchalee Worrachate Sept. 22 (Bloomberg) -- The dollar weakened for the first time in three days against the euro, falling to the lowest level in a year as evidence the global economy is recovering spurred investors to buy higher-yielding assets. The U.S. currency declined the most versus the New Zealand dollar among major counterparts and also dropped versus the Australian dollar as the Asian Development Bank said the region’s economies will expand this year faster than initially forecast. New Zealand’s kiwi climbed to the highest versus the yen in 11 months as its current-account deficit shrank. “In terms of economic recovery, capital will move away from the U.S. to those regions which offer better opportunities,” said Thanos Papasavvas, who helps oversee $4 billion as head of currency management at Investec Asset Management Ltd. in London. “The dollar was the safe haven of 2008, and a lot of the reversal we’re seeing means money can be put back to work.” The dollar slid 0.8 percent to $1.4804 per euro at 11:14 a.m. in New York, from $1.4680 yesterday, after depreciating to $1.4821, the weakest level since Sept. 23, 2008. It declined 0.9 percent to 91.15 yen, from 91.93, and lost 1 percent to $1.6376 per pound, from $1.6217. The yen traded at 134.84 per euro, compared with 134.96. The Swiss franc advanced as much as 1 percent to 1.0216 versus the dollar, the strongest level since July 2008. The currency gained 2.3 percent since Sept. 8, when the three-month dollar London interbank offered rate, or Libor, slid below the rate for the franc for the first time since November, making the greenback the cheapest currency to fund purchases of higher- yielding assets. Euro Versus Pound The euro fell for the first time in seven days against the pound, dropping 0.2 percent to 90.34 pence. It earlier touched 90.82, the highest level since April 9. Goldman Sachs Group Inc. advised today in an e-mailed research note selling the euro versus the pound with a target of 84 pence on “a relative tightening in financial conditions in the U.K. versus the euro zone.” The firm said investors should divest the euro at 90.80 pence and end the trade if the shared currency closed above 92.50. Most major Asian currencies gained after the Asian Development Bank said in a report that the region’s economies, excluding Japan, will grow 3.9 percent in 2009, faster than a March estimate of 3.4 percent. Growth may accelerate in 2010 to 6.4 percent, the bank said. Singapore’s Dollar The Singapore dollar advanced 0.4 percent to S$1.4123 versus the dollar, while India’s rupee appreciated 0.4 percent to 47.9625. The South Korean won was little changed at 1,203.75. Stocks rose in the U.S., Europe and Asia, reducing demand for the dollar as a refuge. The MSCI World Index of 23 developed nations added 0.9 percent to 1,140.75, and the Standard & Poor’s 500 Index advanced 0.5 percent. The VIX, a measure of stock-market volatility known as Wall Street’s fear gauge, dropped 40 percent since the start of the year. The lower the index, the more inclined investors are to buy so-called risk assets such as stocks, commodities and higher-yielding currencies. New Zealand’s dollar rose 1.3 percent to 65.83 yen, after climbing to 66.06, the highest level since Oct. 7. The kiwi increased as much as 2.5 percent to 72.44 U.S. cents, the strongest since August 2008. Australia’s dollar advanced 1.3 percent to 87.41 U.S. cents. The U.S. dollar also weakened on speculation Group of 20 leaders, meeting in Pittsburgh on Sept. 24-25, will call for a reduction in global trade imbalances that may cause further gains in currencies against the dollar. Canada’s View Policy makers need to promote a “sustained growth track and facilitate global adjustment, as well as structural reform which will need to be undertaken in both deficit and surplus countries,” Dimitri Soudas, a spokesman for Canadian Prime Minister Stephen Harper, told reporters yesterday in Ottawa. “There’s talk that world leaders may seek to address the U.S. imbalances,” said Masashi Kurabe, head of currency sales and trading in Hong Kong at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest publicly traded bank. “This may lead to weakness in the dollar.” The U.S. trade deficit widened in July and imports gained by a record 4.7 percent, the Commerce Department said in Washington on Sept. 10. The gap between imports and exports increased 16 percent, the most in more than a decade. The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners including the euro and the yen, fell 0.9 percent to 76.096, snapping gains at two days. Fed Meeting The Federal Reserve will keep its target rate for overnight bank loans at a range of zero to 0.25 percent at its two-day policy meeting starting today, according to all 93 economists in a Bloomberg News survey. Chairman Ben S. Bernanke and his colleagues may discuss how to wind down purchases of mortgage- backed securities. “We wait to see how much the Fed acknowledges the improvement in the data recently,” said John Horner, a currency strategist in Sydney at Deutsche Bank AG, the world’s largest foreign-exchange trader. “The risk is that dollar short positions get taken off prior to that event.” A short position is a bet an asset will decline.

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