The dollar dropped to the weakest level this year against the euro before a report forecast to show U.S. manufacturers boosted output, reducing demand for the relative safety of the greenback. The Australian and New Zealand currencies were near this year’s highs as Asian stocks extended a global rally after the biggest gain in U.S. retail sales for three years encouraged investors to buy riskier assets. The yen surged toward the highest level in seven months against the dollar after Reuters cited incoming Finance Minister Hirohisa Fujii as saying Japan’s new government is opposed to intervening in currency markets unless swings become excessive. “Higher-yielding currencies and riskier assets are in demand as risk appetite returns,” said Masashi Hashimoto, senior foreign exchange analyst at Bank of Tokyo Mitsubishi UFJ Ltd., a unit of Japan’s biggest banking group. The dollar dropped to $1.4686 per euro as of 7:36 a.m. in London from $1.4658 yesterday in New York. It earlier reached $1.4695, the weakest level since Dec. 18. Japan’s currency traded at 132.99 per euro from 133.47 yesterday in New York. It was at 90.55 per dollar from 91.05 yen. Australia’s currency bought 86.68 U.S. cents, close to its strongest since August 2008, from 86.34 cents yesterday in New York. New Zealand’s dollar fetched 70.77 U.S. cents from 70.50 cents, near its highest since August 2008. Retail Sales Benchmark interest rates are 3 percent in Australia and 2.5 percent in New Zealand, compared with Japan’s 0.1 percent and as low as zero in the U.S. The Dollar Index traded near the lowest in one year after a Commerce Department report showed U.S. retail sales increased 2.7 percent last month following a revised 0.2 percent drop in July, adding to signs the recession is ending. The Federal Reserve Board’s measure of U.S. production, due for release today, rose 0.6 percent, the most since October, according to a Bloomberg News survey of economists. The report is forecast to show the proportion of plant capacity in use climbed to 69 percent, the highest in five months. The Nikkei 225 Stock Averaged gained 0.5 percent and the MSCI Asia Pacific Index of regional shares advanced 1.5 percent. Buffett Buying Stocks Warren Buffett’s Berkshire Hathaway Inc. is “buying stocks right as we speak,” he told a conference in California, adding that he’s getting a “lot for my money” in equities. The Dollar Index, which tracks the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, traded at 76.391 from 76.520 yesterday. It earlier hit 76.340, the lowest level since September 2008. Former Fed Chairman Alan Greenspan, speaking in a broadcast to Tokyo clients of Deutsche Bank Securities Inc. today, said that if there were a significant issuance of Treasury securities that increased the national debt, “there would be of necessity downward pressure on the dollar.” At the same time, he said, “you can’t say that without saying what the counterparty currency would be.” The yen rose toward a seven-month high against the dollar after Fujii told Reuters a strong yen has merits for Japan’s economy, saying the recent currency movement wasn’t abnormal. Fujii said he was opposed to intervention in markets if currency moves are gradual, Reuters reported. New Government Japan hasn’t entered the foreign-exchange market since the central bank, at the request of the Finance Ministry, sold a record 14.8 trillion yen ($160 billion) in the first quarter of 2004 in an effort to weaken the currency. “There’s talk that speculators may test the foreign- exchange policy of the new government,” said Toshihiko Sakai, head of trading for foreign exchange and financial products at Mitsubishi UFJ Trust & Banking Corp. in Tokyo. “This could exacerbate yen strength, with the 2009 high of 87.13 likely to come into focus.” As Democratic Party of Japan leader Yukio Hatoyama became prime minister today, Fujii, 77, is set to lead the Ministry of Finance. The pound fell to a four-month low against the euro before a U.K. report that may show the nation’s jobless rate rose to the highest level in 13 years, backing the case for the Bank of England to keep borrowing costs low. U.K. Unemployment Overall U.K. unemployment, as measured by International Labour Organization standards, climbed to 8 percent in the three months to July, the most since 1996, from 7.8 percent between April and June, a Bloomberg survey showed. The Office for National Statistics releases the data today in London. Bank of England Governor Mervyn King said yesterday policy makers are considering lowering the rate they pay financial institutions to hold reserves at the bank to encourage lending. “Sterling is the currency most at risk among the majors in our view,” analysts led by Hans-Guenter Redeker, London-based global head of currency strategy at BNP Paribas SA, wrote in a research note yesterday. “The news and data from the U.K. have added to the bearish outlook.” The Bank of England currently pays financial institutions 0.5 percent to hold reserves at the central bank. While the central bank is boosting its reserves through asset purchases under its so-called quantitative-easing program, King said he doesn’t want them to grow too much. The pound dropped to 89.19 pence per euro after earlier reaching 89.31 pence, the weakest since May 15, from 88.91 pence in New York yesterday.

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