By Matthew Brown and Yoshiaki Nohara Nov. 16 (Bloomberg) -- The dollar and yen fell against most of their major counterparts as Japan’s better-than-forecast economic growth in the third quarter encouraged demand for higher-yielding assets. The greenback and yen dropped versus the euro before a U.S. government report forecast to show retail sales rose last month after dropping in September. Asia-Pacific nations pledged yesterday to maintain stimulus measures until there is “durable” economic growth. “The Japanese data was a big surprise to the upside,” said Lee Hardman, a foreign-exchange strategist in London at Bank of Tokyo-Mitsubishi UFJ Ltd. “That has helped fuel risk- sentiment trades, and that’s boosting the high-yielding emerging-market currencies against the dollar.” The dollar weakened 0.4 percent to $1.4968 per euro at 7:25 a.m. in New York, from $1.4903 on Nov. 13. The yen depreciated 0.3 percent to 133.99 per euro, from 133.63. The dollar fell 0.2 percent to 89.52 yen, from 89.66. Norway’s krone gained 0.7 percent to 5.5747 per dollar and the Brazilian real climbed 0.5 percent to 1.7150 on bets 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. Interest rates as low as zero in the U.S. and 0.1 percent in Japan make the dollar and yen favored currencies for investors seeking to fund such transactions. Japan’s economy expanded at the fastest pace in more than two years in the third quarter, led by a rebound in domestic demand that may ease concern of a return to recession next year. Japan’s GDP Gross domestic product rose at an annual 4.8 percent pace, more than the median forecast of 20 economists in a Bloomberg survey, Cabinet Office figures showed today in Tokyo. U.S. retail sales rose 0.9 percent last month after a 1.5 percent decrease in September, according to the median forecast of 66 economists in a Bloomberg survey. The report from the Commerce Department is due at 8:30 a.m. New York Time. The 21-member Asia-Pacific Economic Cooperation group, representing 54 percent of the global economy, pledged in a statement yesterday to “refrain from raising new barriers” to investment and trade. The group didn’t mention currency distortions, which U.S. companies say give China unfair trade advantages. China’s Ministry of Commerce said international pressure for appreciation in the yuan was “not fair,” as U.S. President Barack Obama started a four-day visit calling for a more balanced relationship between the two nations. China on Yuan Seeking a stronger Chinese currency as the dollar weakens “is not conducive to a global economic recovery and is not fair,” a ministry spokesman, Yao Jian, said at a press briefing in Beijing today. “It’s necessary for us to provide a stable and predictable environment in terms of macroeconomic and exchange-rate policies.” The appreciation of the yuan is part of the “package of necessary reforms” for China’s economy, Dominique Strauss-Kahn, the managing director of the International Monetary Fund, said in a speech in Beijing today. China has kept the yuan at about 6.83 per dollar since July 2008, after a 21 percent gain in the previous three years. 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. Yen Versus Dollar The yen strengthened against the dollar on speculation Japanese investors will bring back earnings on overseas assets. The U.S. will make $100.5 billion in redemptions and interest payments on Treasuries today, according to estimates by Stone & McCarthy Research Associates in Princeton, New Jersey. “The yen is being bought as Japanese investors bring back earnings on Treasuries,” said Takeshi Tokita, vice president of foreign-exchange sales at Mizuho Corporate Bank Ltd. in Tokyo. The yen is poised for its worst tumble since 2005 as doubts about Japan’s fiscal footing double the cost of insuring its debt. The price of hedging against losses on $10 million of the country’s bonds with credit-default swaps soared this month to as much as $76,160 a year from $37,000 in August, as the new government planned record spending and borrowing even with tax revenue falling. The rise in debt protection costs contrasts with that of the U.S., where prices have fallen to about the lowest in a year. The difference in prices reached the widest ever on Nov. 9 after Japan’s debt grew to almost twice the size of the economy. The dollar was under pressure on speculation Federal Reserve officials will reaffirm the central bank’s pledge to keep interest rates low to support growth. Fed Chairman Ben S. Bernanke will speak on the economy at 12:15 p.m. in New York. To contact the reporters on this story: Matthew Brown in London at mbrown42@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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