Dec. 14 (Bloomberg) -- The dollar fell to a three-week low against the euro as Federal Reserve policy makers prepare to discuss interest rates and bond purchases. The greenback dropped against 15 of its 16 major counterparts on speculation the Fed may signal today it’s open to increasing debt purchases beyond the $600 billion already announced. New Zealand’s dollar reached a 10-year low against Australia’s currency after a report showed retail sales in the smaller nation slid by the most since 1997. “Expectations aren’t for anything particularly dramatic to come out of the Fed meeting today, but you can’t entirely discount that,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London. “As people are looking at trends for 2011 they’re realizing that although there may be plenty of slips on the way to resolving the euro crisis, it will be resolved. Therefore if you’re looking at where the prime issue will be in 2011, it probably will be the U.S.” The U.S. currency dropped to $1.3438 per euro as of 9:08 a.m. in London from $1.3391 yesterday, the weakest since Nov. 23. The dollar declined 0.1 percent to fetch 83.34 yen from 83.39 yen. Japan’s currency weakened to 111.96 per euro, also the lowest since Nov. 23. The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, extended yesterday’s declines by 0.4 percent. Ten-year Treasury yields rose two basis points to 3.29 percent, according to BGCantor Market Data, after falling four basis points yesterday. Fed’s QE The Fed today “may emphasize it will continue the current quantitative easing, citing the unemployment rate and sluggish inflation,” strategists at Barclays Bank Plc, led by Tokyo- based chief currency strategist Masafumi Yamamoto, wrote in a note. “Such a statement is likely to weigh on U.S. mid-, long- term yields and the dollar, especially against the yen.” Further government bond purchases by the Fed are “certainly possible,” Chairman Ben S. Bernanke said in an interview broadcast on CBS Corp.’s “60 Minutes” on Dec. 5, referring to the bank’s so-called quantitative easing program. Moody’s Investors Service Inc. yesterday said the U.S. tax- cut package up for a procedural vote in the Senate boosts the chances for a negative outlook on the U.S. credit rating. German Sentiment Demand for the euro gained ahead of data forecast to show German investor confidence rose for a second month. An index of German investor and analyst expectations increased to 3.9 this month from 1.8 in November, according to a Bloomberg survey of economists. The ZEW Center for European Economic Research will release its index, which aims to predict developments six months in advance, in Mannheim today. New Zealand’s retail sales declined 2.5 percent in October, Statistics New Zealand said in Wellington. The drop was the biggest since May 1997. “The kiwi fell quite sharply in response to a big fall in retail sales,” said John Kyriakopoulos, head of currency strategy in Sydney at National Australia Bank Ltd., the nation’s largest lender. “What’s been happening is the market has been pushing out the timing for when the Reserve Bank of New Zealand will raise rates again.” New Zealand’s dollar touched NZ$1.3288 per Aussie dollar today, the weakest since November 2000, before trading at NZ$1.3231. --Editors: Andrew Reierson, To contact the reporters on this story: Lucy Meakin in London at lmeakin1@bloomberg.net. To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.

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