By Lukanyo Mnyanda and Ye Xie Oct. 22 (Bloomberg) -- The dollar rose from almost a 14- month low against the euro on speculation China will withdraw fiscal and monetary stimulus and as U.S. initial jobless claims increased more than forecast, reducing risk demand. South Africa’s rand and South Korea’s won were the biggest losers versus the dollar as stock markets declined worldwide. Sweden’s krona fell against the dollar and euro after the Riksbank kept the benchmark interest rate at a record low and repeated its intention not to raise rates for another year. China’s data “is consistent with an easing off of the economic stimulus as we go forward, which you could argue is occurring already to some extent,” said Steven Barrow, head of Group of 10 research at Standard Bank Plc in London. “The dollar is taking its cue from stocks.” The dollar strengthened 0.2 percent to $1.4992 per euro at 8:36 a.m. in New York, from $1.5016 yesterday, when it touched $1.5046, the weakest level since August 2008. The yen slid 0.2 percent to 91.18 per dollar, from 90.97. The yen was little changed at 136.69 per euro, from 136.61 yesterday. The U.S. currency weakened beyond $1.50 versus the euro yesterday for the first time since August 2008 as signs of economic recovery encouraged investors to sell the greenback and buy higher-yielding assets. The dollar reached a 2 1/2-year high against the euro on Oct. 28, 2008, as investors sought the safety of U.S. government debt after the Sept. 15, 2008, bankruptcy of Lehman Brothers Holdings Inc. froze credit markets. Fed Rate View The U.S. currency may remain under pressure as the Federal Reserve trails other central banks in increasing borrowing costs. The dollar will trade at $1.50 at year-end, according to the median forecast of 48 analysts in a Bloomberg survey. It tumbled to $1.6038 per euro on July 15, 2008, the weakest since the 16-nation currency’s 1999 debut. The rand depreciated 1 percent to 7.4887 versus the dollar and the won weakened 0.9 percent to 1,189.75 as the drop in stocks discouraged carry trades, in which investors sell the currency of a nation with low borrowing costs and buy assets where returns are higher. The Fed’s target lending rate of zero to 0.25 percent compares with 7 percent in South Africa and 2 percent in South Korea. Europe’s Dow Jones Stoxx 600 Index dropped 1.6 percent, after the Nikkei 225 Stock Average retreated 0.6 percent. U.S. stock index futures fell. China reported gross domestic product expanded at the fastest pace in a year and indicated that policy makers will increase their focus on inflation. China’s Growth The nation’s economy expanded 8.9 percent in the third quarter, following a 7.9 percent advance in the previous quarter, China’s statistics bureau said. The median estimate of 34 economists surveyed by Bloomberg was for a 9 percent gain. Inflationary expectations are increasing as prices rise month-over-month, statistics bureau spokesman Li Xiaochao said today at a press briefing in Beijing. The number of Americans filing first-time claims for unemployment benefits increased to 531,000 in the week ended Oct. 17, from a revised 520,000 in the previous week, the Labor Department said. The median forecast of 43 economists in a Bloomberg survey was for an advance to 515,000 from a previously reported 514,000. Sweden’s currency declined 0.8 percent to 6.9047 against the dollar and was 0.7 percent weaker at 10.3407 per euro. The Stockholm-based Riksbank’s decision to keep its seven-day repo rate at 0.25 percent was predicted by all 26 economists in a Bloomberg survey. ‘Dovish Remarks’ “We expect the krona to stay lower against the euro in the wake of the Riksbank’s dovish remarks,” said Roberto Mialich, a senior global-currency strategist in Milan at UniCredit SpA. The euro’s losses were tempered before a report tomorrow forecast to show German business confidence increased. The Munich-based Ifo institute’s business climate index, based on a survey of 7,000 executives, climbed to 92 in October from 91.3 in the previous month, according to a survey. European Central Bank council member Erkki Liikanen said this week on Finland’s YLE Radio Suomi that the euro area’s economy is no longer weakening. Traders maintained bets the ECB will keep its benchmark interest rate at 1 percent until the end of the first quarter next year. The implied yield on the three-month Euribor futures contract for March 2010 delivery decreased 0.02 percentage point to 1.05 percent. South Korea’s won also weakened after Yonhap News said the nation is studying measures to reduce currency volatility, citing government officials it didn’t identify. “Upside in the won to the end of the year is limited because of the government,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong. The currency reached 1,155.05 on Oct. 15, the strongest level since September 2008.

Source