The dollar fell to the lowest in more than a year against the euro, franc and Canadian currency as improving corporate earnings helped Asian stocks extended a global rally, boosting demand for higher-yielding assets. The yen dropped along with the dollar on speculation Goldman Sachs Group Inc. will today join JPMorgan Chase & Co. in reporting improving earnings, sapping demand for safe-haven currencies. Australia’s dollar surged to a 14-month high after Governor Glenn Stevens said the central bank can’t be too timid in raising interest rates as the economic crisis passes. “Good earnings and rising stocks underpin risk appetite,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s third-largest bank. “That will weigh on the yen as funding currency along with the U.S. dollar.” The U.S. currency fell to $1.4953 per euro at 2:10 p.m. in Tokyo from $1.4925 in New York yesterday. It earlier touched $1.4960, the weakest since August 2008. The U.S. currency declined to 1.0122 Swiss francs, the lowest since July 2008, before trading at 1.0129 francs from 1.0150 francs. The yen dropped to 133.65 per euro from 133.47. Earlier it reached 133.91, the lowest since Sept. 24. Japan’s currency traded at 89.39 per dollar from 89.44. Australia’s dollar gained 0.7 percent to 92.15 U.S. cents, the highest since August 2008. The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, sank 0.4 percent to 75.257, the lowest since August 2008. Japan’s Nikkei 225 Stock Average gained 1.6 percent, and the MSCI Asia Pacific Index of regional shares rose 1 percent. Rising Stocks The Dow Jones Industrial Average yesterday closed above 10,000 for the first time in a year after JPMorgan posted third- quarter earnings of $3.59 billion, or 82 cents a share, compared with analysts’ estimates of 51 cents a share. Goldman Sachs’ third-quarter profit, which will be released today, will probably almost triple to $2.34 billion, according to analysts’ average estimates in a Bloomberg survey. “Negative dollar sentiment as a result of ongoing risk appetite is still very much in place,” said Ray Attrill, global research director at Forecast Ltd. in Sydney. “Anticipation of good results in the financial sector has been one of the factors driving U.S. stocks.” The dollar fell against 15 of its 16 major counterparts as the Federal Reserve is expected to report U.S. industrial output rose 0.2 percent in September after gaining 0.8 percent in August, according to the median estimate of 75 economists in a Bloomberg News survey. The data is due tomorrow. Fed Rates Fed minutes yesterday showed some policy makers were open last month to boosting the central bank’s $1.25 trillion mortgage-backed securities purchase program. “The way the markets are interpreting good global news at the moment is to sell greenbacks,” said Adam Carr, senior economist in Sydney at ICAP Australia Ltd., a unit of the world’s largest broker of trades between banks. “The Fed is basically saying it’s not going to raise rates anytime soon, so the yield advantage enjoyed by many other currencies including the Australian dollar or the euro is going to be around for a long time.” Benchmark interest rates are 3.25 percent in Australia and 1 percent in the euro zone, compared with 0.1 percent in Japan. The Fed’s target rate for overnight bank loans is zero to 0.25 percent. The central bank may start raising its target rate in the second quarter of 2010, according to analysts’ forecasts compiled by Bloomberg. The so-called Aussie surged after Reserve Bank of Australia Governor Stevens said the central bank can’t be “too timid” in raising interest rates, stoking speculation it will add to last week’s unexpected rate increase. Goldman Sachs Forecasts Goldman Sachs said the U.S. dollar is likely to extend declines against the euro and most commodity-backed currencies over the coming six months, based on the greenback’s correlation with cyclical assets and capital flows. The bank now expects the Canadian dollar to reach parity with the U.S. currency in three months. The Australian dollar will peak at 95 U.S. cents and Brazil’s real will trade at 1.65 to the dollar in three months. The dollar weakened to C$1.0210 from C$1.0236, after earlier reaching C$1.0208, the lowest level since July 2008. The dollar may sink to 50 yen next year and eventually lose its role as the global reserve currency, Sumitomo Mitsui Banking Corp.’s chief strategist said, citing trading patterns and a likely double dip in the U.S. economy. ‘Excess Consumption’ “The U.S. economy will deteriorate into 2011 as the effects of excess consumption and the financial bubble linger,” said Daisuke Uno at Sumitomo Mitsui, a unit of Japan’s third-biggest bank. “The dollar’s fall won’t stop until there’s a change to the global currency system.” The greenback is heading for the trough of a super-cycle that started in August 1971, Uno said, referring to the Elliot Wave theory, which holds that market swings follow a predictable five-stage pattern of three steps forward, two steps back. The dollar will target 50 yen during the current wave, based a retracement using the Fibonacci series of numbers, the strategist said. To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@

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