By Oliver Biggadike and Ye Xie Nov. 14 (Bloomberg) -- The dollar fell against most of its major counterparts as a report showed the euro nations emerged from their worst recession since World War II, encouraging investors to buy higher-yielding assets. The euro advanced for a second week against the dollar and approached its highest level since August 2008 before stalling just short of $1.5050, a level strategists identified as a threshold for further gains. President Barack Obama may discuss China’s currency during his visit to Asia after Treasury Secretary Timothy Geithner said the region has shown a commitment to adopting “market-determined” exchange rates. “The recovery seems to be on firmer footing in other parts of the world,” said Jessica Hoversen, an analyst in Chicago at the futures broker MF Global Ltd. “You had everybody talking about the flexibility of Asia-Pacific currencies and how they need to move to a more flexible regime. The dollar initially caught a bid on that.” The dollar slid 0.4 percent to $1.4903 per euro this week, from $1.4847 on Nov. 6. It touched $1.5048 on Nov. 11, within a fifth of a cent of the 15-month low reached on Oct. 26. The dollar dropped for a third week against the yen, falling 0.2 percent to 89.66, from 89.88 The euro gained 0.1 percent to 133.63 yen, from 133.45. New Zealand’s dollar advanced 2.5 percent to 74.35 U.S. cents and Norway’s krone appreciated 1.4 percent to 5.6129 per dollar on speculation investors will increase carry trades, in which they sell the currency of a nation with low borrowing costs and buy assets where returns are higher. Benchmark interest rates as low as zero in the U.S. make the dollar a favored currency for investors seeking to fund such trades. Europe’s GDP Gross domestic product in the euro region increased 0.4 percent from the second quarter, when it fell 0.2 percent, the European Union’s statistics office in Luxembourg said yesterday. Germany’s GDP expanded 0.7 percent in the third quarter, and France’s increased 0.3 percent, separate reports showed. The U.S. trade deficit increased 18 percent to $36.5 billion, the widest level since January, the Commerce Department said yesterday in Washington. Imports surged, swamping a gain in exports, as the U.S. economy rebounded. China triggered speculation on Nov. 11 that the yuan may rise when policy makers dropped a pledge from their monetary- policy report to keep the currency “basically” stable. China has kept the yuan at about 6.83 per dollar since July 2008, after a 21 percent gain in the previous three years. Yuan Versus Euro The link of the yuan to the weakening dollar has pushed the Chinese currency down 14 percent versus the euro and 8 percent against the yen over the past year, adding to pressure from China’s export competitors to let the yuan appreciate. “The market is looking at appreciation expectations for the yuan again,” said Geoffrey Yu, a currency strategist at UBS AG in London. A stronger yuan will help other Asian nations be more comfortable allowing their own currencies to rise, Yu said. Nine of 10 major Asian currencies tracked by Bloomberg gained against the dollar in the past three months. The South Korean won was the best performer, rising 6.6 percent to 1,160.32 per dollar. Asian countries have shown a “commitment to moving over time to a more flexible market-determined exchange system,” Geithner, attending a meeting of the Asia-Pacific Economic Cooperation group in Singapore, said this week in an interview on Bloomberg Television. “We’ve seen a lot of progress in that direction over the last several years.” Deputy Finance Minister Shin Je Yoon of South Korea said this week the nation will leave the level of its currency to market forces after adding about $63 billion to its foreign- exchange reserves this year to slow the appreciation of the won. Japanese Bonds Japanese government bonds posted their first weekly advance in more than a month, pushing the yield on the 10-year security to 1.34 percent, the lowest level since Oct. 19. Maintaining “the trust of investors in the government bond market is our priority,” Finance Minister Hirohisa Fujii said on Nov. 10. That day, the 10-year bond’s yield reached 1.49 percent, the highest level in almost five months. “The near-term concern about the fiscal deficit is exaggerated,” said Lee Hardman, a foreign-exchange strategist in London at Bank of Tokyo-Mitsubishi UFJ Ltd. “It’s a long- term story, but the move has become overdone in the near term.” Japan’s public debt, already the largest in the industrialized world, is approaching twice the size of gross domestic product, according to the Organization for Economic Cooperation and Development. Mexico’s peso was the biggest winner versus the dollar this week, appreciating 2.8 percent to 13.0450 on improving prospects for an economic recovery. The currency touched 13.0124, the strongest level since Oct. 30 Industrial output decreased 5.7 percent in September from a year earlier, the national statistics institute said this week. The median forecast of 18 analysts in a Bloomberg survey was for a drop of 6.2 percent. To contact the reporters on this story: Oliver Biggadike in New York at obiggadike@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net

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