By Inyoung Hwang and Bo Nielsen Jan. 12 (Bloomberg) -- The dollar and yen rose against the Norwegian krone and South African rand as China raised the proportion of deposits that banks must set aside as reserves, paring demand for higher-yielding assets. The yen advanced against all its 16 most-traded counterparts tracked by Bloomberg as U.S. stock-index futures decreased on Alcoa Inc.’s earnings. Australia’s dollar fell from almost the highest level since November versus the greenback as the nation’s home-loan approvals tumbled. “The equity markets and China’s move toward tightening policy has put pressure on risk sentiment,” said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. “It should be a good time for the U.S. currency going forward.” The yen appreciated 1.1 percent to 132.24 per euro at 9:15 a.m. in New York, from 133.64 yesterday. The dollar advanced 0.2 percent to $1.4486 per euro, from $1.4513. The U.S. currency decreased 0.9 percent to 91.29 yen, from 92.09. The rand slid 1.6 percent to 7.4949 against the dollar and the krone fell 1.7 percent to 16.14 yen. Benchmark interest rates of 1.75 percent in Norway and 7 percent in South Africa encourage investors to borrow dollars and yen to buy assets denominated in the higher-yielding currencies when risk demand increases and to reverse those bets when it falls. Australia’s dollar decreased for the first time in three days, falling 0.6 percent to 92.37 U.S. cents. The currency touched 93.26 cents yesterday, the highest level since Nov. 18. Australian Housing The number of loans granted to build or buy houses and apartments in Australia dropped 5.6 percent in November after a 1.9 percent decrease in the prior month. The median estimate of economists surveyed by Bloomberg was for a 0.5 percent decline. The MSCI World Index fell 0.3 percent, Europe’s Dow Jones Stoxx 600 Index dropped 0.9 percent, and futures on the Standard & Poor’s 500 Stock Index slipped 0.7 percent. Alcoa, the largest U.S. aluminum maker, said fourth-quarter profit excluding certain items was 1 cent a share, trailing analysts’ average estimate for earnings of 6 cents. China’s reserve requirements will increase by 0.5 percentage point from Jan. 18, the nation’s central bank said on its Web site. The existing levels are 15.5 percent for big banks and 13.5 percent for smaller ones. “Earlier and more aggressive monetary tightening from China poses downside risk to the liquidity-fueled risk-asset rally,” said Lee Hardman, foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. Dollar Index The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six major U.S. trading partners including the euro and yen, rose for the first time in three days, gaining 0.2 percent. The gauge of the dollar posted its biggest daily increase since January 2009 on Dec. 4, when the Labor Department reported an unexpected drop in U.S. unemployment. The index had fallen 17 percent from the 2009 peak reached in March as evidence of a global economic rebound spurred investors to buy higher-yielding assets funded with dollars. The dollar dropped today versus the yen as the yield advantage on two-year U.S. notes versus comparable Japanese bonds decreased in the wake of a worse-than-expected payrolls report on Jan. 8. The extra yield on two-year Treasuries relative to Japanese notes narrowed to 0.74 percentage point today, the least since Dec. 22, as traders increased speculation that the Fed will extend its stimulus. U.S. Jobs U.S. employers eliminated 85,000 jobs in December after a revised addition of 4,000 positions in the previous month, the Labor Department said last week. The median estimate of 76 economists in a Bloomberg News survey was for no change in nonfarm payrolls. The unemployment rate held at 10 percent. Fed officials debated at the Dec. 15-16 meeting increasing and extending their stimulus program should the economy weaken, according to minutes released Jan. 6. A few favored such a move while one policy maker discussed a reduction. The trade deficit widened to $36.4 billion in November from a revised $33.2 billion in the prior month, the Commerce Department said today. The median estimate of 76 economists in a Bloomberg News survey was for an increase to $34.6 billion from a previously reported $32.9 billion. To contact the reporters on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net; Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net

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