By Ye Xie and Gavin Finch Oct. 7 (Bloomberg) -- The dollar rose against the euro for the first time in four days as U.S. stock-index futures erased their gain, reducing demand for riskier assets. “High-yielding currencies are backtracking with equities off the highs,” said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. “There are some signs that the moves look quite extended.” The dollar appreciated 0.3 percent to $1.4677 against the euro at 9:16 a.m. in New York, from $1.4722 yesterday. The dollar rose 0.5 percent to 89.25 yen, from 88.82, after earlier reaching 88.01, the lowest level since Jan. 23. The euro traded at 130.90 yen, compared with 130.76. U.S. stock-index futures swung between gains and losses after oil and metal prices retreated from their highest levels of the day as the dollar rebounded. Standard & Poor’s 500 Index futures expiring in December fell 0.2 percent after earlier rising as much as 0.6 percent. The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, rose after three days of declines, adding 0.2 percent to 76.466. Deutsche Bank AG, the world’s biggest currency trader, reduced its 2010 dollar-euro forecast by 18 percent on speculation the Federal Reserve will trail other central banks in increasing interest rates. The dollar will trade at $1.40 per euro by the end of next year, after weakening to $1.55 in the first quarter, the bank said today. The previous forecast was $1.15. Consumer Debt “The U.S. consumer is hampered by large debts and won’t be able to lead the nation out of recession in a strong way, so the Fed will keep rates low in order to support the household sector,” Bilal Hafeez, global head of currency strategy at Deutsche Bank in London, said in an interview. “The Fed is going to err on the side of caution in terms of exiting policy.” The yen rose earlier to the highest level against the dollar since January as Japan’s Finance Minister Hirohisa Fujii signaled that policy makers are comfortable with their currency’s strength. “If the yen’s movements become abnormal or disorderly, we will need to consider some action,” Fujii said at a news conference in Tokyo today, reiterating remarks made over the past week. “But now is the time to calmly watch the currency markets.” Stronger Yen The yen gained 4 percent in the past month versus the dollar, threatening the economic recovery by making exporters’ products more expensive and eroding profits earned abroad. The currency may keep climbing, “making things tough again next year,” Michiyoshi Mazuka, president of Fujitsu Ltd., said yesterday at a trade fair just outside Tokyo. Goldman Sachs Group Inc. recommended buying India’s rupee against the dollar as the central bank allows a stronger currency to help temper inflation. The rupee, the third-best performer this year among the 10 most-traded currencies in Asia excluding Japan, rose to the highest in more than a year after Reserve Bank of India Governor Duvvuri Subbarao said in Istanbul on Oct. 5 he may need to tighten monetary policy earlier than advanced economies. Wholesale prices rose the most since the end of May in the week ended Sept. 19. Subbarao will review monetary policy on Oct. 27. “We expect higher inflation to allow the RBI to be more tolerant of rupee appreciation,” Goldman Sachs analysts, who weren’t identified, wrote in a report today. They predicted the rupee will rise to 44 per dollar as an “initial target.” The rupee rose 0.4 percent to 46.68 per dollar. It earlier jumped to 46.49, the strongest level since September 2008. Analysts surveyed by Bloomberg predict it will reach 45.95 by the end of June. New Zealand’s dollar dropped 0.2 percent to 73.26 U.S. cents after reaching 73.98, the highest level since July 2008. Auckland-based Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, said milk powder prices were at a 13- month high.

Source