The euro fell from a one-year high versus the U.S. dollar amid speculation that global policy makers will discuss the rapid appreciation of the 16-nation currency at the forthcoming meeting of Group of 20 leaders. The euro weakened after Reuters cited an official as saying France is concerned about the currency’s strength and intends to press fellow G-20 members to set a timeframe for a discussion on exchange rates. The pound rose versus the dollar after a report showed Bank of England Governor Mervyn King and David Miles joined a unanimous vote at the last policy meeting to suspend increases in the bank’s asset-purchase plan. “The market is becoming sensitive to comments from monetary authorities as the G-20 meeting approaches,” said Kosei Fujita, a foreign-currency dealer in Tokyo at SBI Liquidity Markets Co., a unit of financier SBI Holdings Inc. “As comments from French government officials added to concerns, people are inclined to close long positions on the euro.” A long position is a bet that an asset will rise. The European currency traded at $1.4741 at 10:55 a.m. in Tokyo from $1.4735 yesterday in New York where it touched $1.4844, the strongest level since September 2008. It traded at 134.55 yen from 134.52 yen in New York. The dollar was at 91.28 yen from 91.29 yen yesterday. The French government is seeking a “framework” for discussions, Reuters quoted the official as saying. G-20 leaders will meet in Pittsburgh this week to discuss the latest developments of the global economy and financial markets. ECB “The European Central Bank didn’t intervene to reduce the value of the single currency from these levels in the past,” said Daisaku Ueno, chief analyst at Gaitame.Com Research Institute Ltd., a unit of Japan’s largest currency margin company. “Still, we need to assess carefully if the recent appreciation of the euro will prompt monetary authorities to change their currency stance.” Britain’s currency rose against 14 of the 16 most-active currencies after King and Miles switched sides and argued for consensus on the 175 billion-pound ($286 billion) program. All nine members of the Monetary Policy Committee opted to keep the interest rate at 0.5 percent, minutes of the Sept. 10 decision released by the central bank in London showed yesterday. The U.K. currency climbed to $1.6408 from $1.6341. New Zealand’s dollar was at 72.01 U.S. cents from 71.97 cents yesterday, when it reached a 13-month high of 73.12 cents. Australia’s dollar traded at 86.99 U.S. cents from 86.97 U.S. cents yesterday. New Zealand Finance Minister Bill English said today the strength of the nation’s currency may prevent an export-led economic recovery. Kiwi Strength “We are concerned about the New Zealand dollar,” English told Radio New Zealand. “Ideally we want an export-led recovery. The high dollar is making it more difficult for the export sector to get off the floor.” Losses of the euro were tempered before a report forecast to show that German business confidence rose for a sixth month. The Munich-based Ifo institute’s business climate index, based on a poll of 7,000 executives, increased to 92.0 in September from 90.5 in the previous month, according to a Bloomberg News survey of economists. The institution releases the data today. “The trend for improving risk appetite amid an economic rebound is unchanged,” said Yuji Saito, head of the foreign- exchange group in Tokyo at Societe Generale SA, France’s third- largest bank. “The bias is for the dollar to weaken.” Adding to signs that the global economy may be recovering, purchases of existing U.S. homes climbed to a 5.35 million annual rate in August, the most since August 2007, from a 5.24 million rate in July, according to a Bloomberg News survey of economists. The National Association of Realtors will release the report today. FOMC Statement The dollar fell against 10 out of 16 most-active currencies amid speculation that the Federal Reserve Board will stand pat on interest rates to keep borrowing costs low. The central bank said it will slow its purchases of mortgage securities, seeking to avoid disrupting the housing market as an economic recovery takes hold. “The Committee will gradually slow the pace of these purchases in order to promote a smooth transition in markets and anticipates that they will be executed by the end of the first quarter of 2010,” the Federal Open Market Committee said in a statement today after meeting in Washington. The $1.45 trillion program was scheduled to cease by the end of this year. Chairman Ben S. Bernanke and fellow policy makers indicated for the first time since August 2008 that the economy is accelerating, even as they recommitted to keep their benchmark interest-rate “exceptionally low” for an “extended period.” Dollar Libor “Signs of an improvement in the U.S. economy have so far failed to boost inflation expectations or hopes for an early exit from the current policy,” said Jitsuo Tachibana, senior manager for marketing at Sumitomo Trust & Banking Co. “As interest rates in the U.S. remain low, the hyper-liquid dollar will continue to trickle down into higher-yielding currencies. The cost of three-month loans in dollars between banks dropped yesterday to a record low of 0.285 percent, according to the British Bankers’ Association. The London interbank offered rate, or Libor, for dollar loans slid below that of the Swiss franc on Sept. 8 for the first time since November, making the greenback the cheapest among the major currencies to borrow.

Source