By Oliver Biggadike and Matthew Brown Nov. 23 (Bloomberg) -- The dollar fell the most in two weeks against the euro after President James Bullard of the Federal Reserve Bank of St. Louis said policy makers should keep stimulus measures in place beyond March. The U.S. currency and yen dropped versus major counterparts as commodities and stocks advanced, spurring demand for riskier assets. Bullard said yesterday the Fed should extend its purchases of mortgage-backed securities to give policy makers “the option to react to future news,” maintaining concern the market is being flooded with greenbacks. “It’s probably been weighing on the dollar,” said Brian Kim, a currency strategist in Stamford, Connecticut, at UBS AG. “It’s another sign that they’re trying to go slowly on this.” The dollar weakened 0.8 percent to $1.4989 per euro at 10:10 a.m. in New York, from $1.4862 on Nov. 20. It earlier slid 0.9 percent, the biggest intraday decline since Nov. 9. The yen depreciated 0.9 percent to 133.31 versus the euro, from 132.09. The yen was little changed at 88.94 per dollar. South Africa’s rand was the biggest winner versus the yen and dollar among the major currencies tracked by Bloomberg as the gain in commodities and stocks encouraged carry trades, in which investors buy higher-yielding assets with amounts borrowed in nations with low interest rates. The rand strengthened 1.7 percent to 11.87 yen and 1.7 percent to 7.4837 per dollar. The New Zealand dollar increased 1.4 percent to 65.26 yen and 1.5 percent to 73.51 U.S. cents. Borrowing Costs Benchmark rates of zero to 0.25 percent in the U.S. and 0.1 percent in Japan make their currencies popular for funding such trades. Three-month deposits in South Africa earn 7.579 percent. The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, decreased 0.8 percent to 75.057. It slid to 74.679 on Nov. 16, the lowest level since August 2008. Futures contracts on the Chicago Board of Trade showed a 31 percent chance that the Fed will raise interest rates by June, down from 67 percent odds a month ago. The Fed said on Nov. 4 that it will purchase a total of $1.25 trillion of agency mortgage-backed securities through the first quarter of next year. It reiterated that interest rates will stay at almost zero for “an extended period.” Gold climbed to a record, and an index of global shares advanced for the first time in three days. Bullion for December delivery reached $1,167.80 an ounce, while the MSCI World Index jumped 1 percent. Housing Report U.S. purchases of existing homes increased to a 6.10 million annual rate last month from 5.54 million in September, the National Association of Realtors reported today. The median forecast of 66 economists in a Bloomberg survey was for an increase to 5.70 million from a previously reported 5.57 million. Investors trying to protect gains in stocks at year-end won’t be enough to strengthen the dollar, and history shows the euro tends to rise against the U.S. currency in December, Steven Barrow, head of Group of 10 currency strategy in London at Standard Bank Plc, wrote in a research report. “The ample provision of global liquidity, through central- bank action and dollar weakness, is not turning around,” Barrow wrote. “Given that the dollar has spent most of its life falling, a strong euro seasonal in December does not seem to be consistent with the idea of year-end profit taking.” The dollar will depreciate as much as 7.1 percent versus the euro, according to Standard Chartered Plc, Aletti Gestielle SGR, HSBC Holdings Plc and Scotia Capital Inc., the most accurate dollar forecasters. ECB Outlook The euro advanced against the yen for the first time in three days on speculation the European Central Bank will gradually end its stimulus measures. The ECB tightened last week the rules for the collateral it accepts against loans as it tries to restore the “proper functioning” of markets and prepares to slow unconventional liquidity programs. “Most guesses are that the ECB will provide one or two six-month fixed-rate operations,” Brown Brother Harriman & Co. strategists led by Marc Chandler in New York wrote in a report today. “That overall shift in emphasis to looking at an exit policy should see the euro supported by interest-rate differentials against both dollar and sterling.” The euro extended its gains as reports showed Europe’s services and manufacturing industries expanded in November at the fastest pace in two years. A composite index based on a survey of purchasing managers in both industries in the 16-nation euro area rose to 53.7 this month from 53 in October, London-based Markit Economics said today in a statement. A reading above 50 indicates expansion. To contact the reporters on this story: Oliver Biggadike in New York at obiggadike@bloomberg.net; Matthew Brown in London at mbrown42@bloomberg.net

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