By Ye Xie and Anchalee Worrachate Sept. 24 (Bloomberg) -- The dollar declined toward a one- year low against the euro as U.S. initial jobless claims unexpectedly fell last week, encouraging investors to buy higher-yielding assets at the expense of the greenback. Sterling weakened beyond 91 pence per euro for the first time since April as a newspaper reported that Bank of England Governor Mervyn King said the pound’s drop is “very helpful” to the process of rebalancing the U.K. economy. Australia’s currency advanced against the greenback as the Reserve Bank reported evidence of strength among the nation’s banks. “The dollar will remain a main funding currency,” said Werner Eppacher, head of foreign exchange at Deutsche Asset Management in Frankfurt, in an interview on Bloomberg Television. “The trend is strong, the momentum is there.” The dollar slid 0.3 percent to $1.4785 per euro at 9:20 a.m. in New York, from $1.4735 yesterday, when it declined to $1.4844, the weakest level since Sept. 22, 2008. The dollar decreased 0.7 percent to 90.63 yen, from 91.29. The yen advanced 0.4 percent to 133.99 per euro, from 134.52. The Federal Reserve said yesterday it will end its $1.45 trillion in purchases of mortgage-backed securities and housing agency debt three months later than previously scheduled, indicating the economic recovery may not be as robust as previously expected. Purchases of existing U.S. homes climbed last month to a 5.35 million annual rate, the most since August 2007, according to the median forecast of 74 economists in a Bloomberg News survey. The National Association of Realtors will release the report at 10 a.m. in Washington. U.S. Employment U.S. initial jobless claims fell to 530,000 for the week ended Sept. 19, from a revised 551,000 the week before, the Labor Department reported today. The median forecast of 44 economists surveyed by Bloomberg News was for an increase to 550,000 from a previously reported 545,000. “The implication is for a weaker dollar,” said Daniel Katzive, a senior currency strategist at Credit Suisse Group AG in New York. “If data supports risk appetite, funds will flow out to chase higher-yielding assets.” The euro earlier advanced versus the dollar after a report showed German business confidence rose to a 12-month high this month. The Munich-based Ifo institute’s business climate index, based on a survey of 7,000 executives, increased to 91.3 in September, from 90.5 in the previous month. Weaker Pound The pound dropped as much as 1.3 percent to 91.42 pence per euro, the weakest level since April 3, on King’s comment on the currency reported in the Newcastle Journal. Sterling slid as much as 1.1 percent to $1.6170. King also told the newspaper that policy makers have stabilized a “very sharp fall” in gross domestic product and prevented a “very, very nasty outcome.” The pound may weaken to 94 pence per euro by the end of the year, according to Commerzbank AG. “A currency, which the country’s own central bank likes to see weak, obviously is not an attractive investment,” Commerzbank analysts including Lutz Karpowitz in Frankfurt wrote in a research note today. The Australian dollar advanced 0.7 percent to 87.56 U.S. cents after the Reserve Bank said the nation’s four largest banks, including Westpac Banking Corp. and Commonwealth Bank of Australia, posted combined after-tax profits of A$8.6 billion ($7.5 billion) in the latest half year. ‘More Resilient’ “The economy and the financial structure were more resilient than the market had anticipated,” Claudio Piron, Singapore-based head of Asia currency research at JPMorgan Chase & Co., said in a Bloomberg Television interview. “It really underpins the Aussie.” Australia’s currency reached 87.89 cents yesterday, the highest level since Aug. 22, 2008. The New Zealand dollar increased 0.5 percent to 72.31 U.S. cents after reaching 73.12 cents yesterday, the strongest since Aug. 4, 2008. The yen advanced against the dollar and euro on speculation Japanese companies returned from a three-day holiday to repatriate funds before the end of the fiscal first half. Japan’s currency rose 6.5 percent against the dollar this quarter, reducing the value of overseas sales by Japanese companies when converted into their home currency. The Japanese government announced this year that it would waive taxes on repatriated profits from April 1 to help support the economy. Under previous laws, companies had to pay a combined 40 percent tax on overseas earnings. The country’s fiscal first half ends on Sept. 30. Japanese markets were closed Sept. 21-23 for national holidays. New Prime Minister Yukio Hatoyama meets counterparts from Group of 20 nations in Pittsburgh today to discuss how to sustain a recovery from the worst global recession since the 1930s. German Chancellor Angela Merkel told reporters in Berlin that leaders will discuss exchange rates.

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