By Anchalee Worrachate and Yasuhiko Seki Feb. 16 (Bloomberg) -- The dollar fell against higher- yielding currencies as gains in stocks and commodities, as well as signs of improving corporate earnings, reduced demand for the safest assets. The U.S. currency fell against 15 of its 16 most-traded peers. The Australian dollar rose for a second day as the central bank said further increases to its benchmark interest rate were likely if the economy improves. The euro snapped a four-day decline versus the dollar amid speculation the 16- nation currency’s recent losses, prompted by Greece’s financial turmoil, were too rapid. “The market seems to be driven by improved risk appetite,” said Henrik Gullberg, a currency strategist at Deutsche Bank AG in London. “The euro also gained some ground as some signs emerged that policy makers are warming up to the idea of providing some help to Greece. The market might have gone too far in terms of risk aversion recently.” The dollar weakened to $1.3645 per euro as of 10:15 a.m. in London from $1.3598 yesterday. It declined to 89.39 U.S. cents against the Australian dollar from 88.84 cents, and dropped to 70.40 U.S. cents per New Zealand dollar. The MSCI World Index of global equities rose 0.5 percent as Barclays Plc, the U.K.’s second-largest bank, said 2009 profit more than doubled and Australia’s Westpac Banking Corp.’s said earnings climbed 33 percent. Copper on the London Metal Exchange rallied 1.8 percent and nickel jumped 2.5 percent. RBA Minutes Benchmark interest rates are 3.75 percent in Australia and 2.5 percent in New Zealand, attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits. The Australian dollar reached the highest this month against the U.S. currency after the release of the central bank’s meeting minutes, which said its decision to keep interest rates unchanged this month was “finely balanced” amid concern European sovereign risks may weaken the global recovery. The Reserve Bank of Australia will increase its target rate by 1 percentage point this year, according to a Bloomberg News survey. RBA Governor Glenn Stevens was the first central banker in the world to raise borrowing costs three times last year, taking the cash rate target to 3.75 percent in December from 3 percent at the start of October. The currency will rise to 91 U.S. cents by the end of March, according to the median forecast of 32 analysts in a Bloomberg survey. Euro Rebounds The euro stayed higher against the dollar even after a survey showed German investor confidence declined for a fifth month in February as the economic recovery lost momentum. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict developments six months ahead, slipped to 45.1 this month from 47.2 in January. Economists a reading of 41, according to the median of 38 estimates in a Bloomberg survey. The euro’s 14-day relative strength index, or RSI, stayed below 30 for a third day, a sign the currency may be poised to rebound after dropping too fast. “The euro has been sold quite a lot, so short-term players may want to unwind some huge short positions,” said Tomohiro Nishida, a foreign-currency dealer at Chuo Mitsui Trust & Banking Co. “This may cause a brief rebound.” A short position is a bet that an asset’s price will decline. Debt Burdens The euro has fallen about 5.2 percent against the dollar over the past month on speculation that rising sovereign debt burdens among some of the region’s weakest economies will hamper a recovery. European leaders have refused to detail how they would rescue Greece. Finance ministers meeting in Brussels today signaled yesterday they are ready to force Greece to make deeper cuts to its deficit rather than provide financial assistance. The British pound strengthened 0.2 percent to $1.5687 and 141.28 yen as a report showed inflation accelerated in January to its fastest pace in 14 months. Consumer prices rose 3.5 percent last month from a year earlier, the Office for National Statistics in London said. A reading deviating more than a percentage point from the Bank of England’s 2 percent target requires Governor Mervyn King to write to Chancellor of the Exchequer Alistair Darling setting out his plans to return to the goal. The yen ended a two-day loss against the dollar on speculation Japanese investors are increasing repatriation of overseas earnings before an estimated $48 billion of U.S. Treasuries mature this week. Japanese Deflation “A relatively huge repatriation flow pushed down the dollar against the yen due to the bond redemption and coupon payment,” said Takashi Kudo, general manager of market information service in Tokyo at NTT SmartTrade Inc. The U.S. prepared to pay $48.3 billion in redemption and $21.6 billion in coupon payments for Treasuries this week, according to estimates by Stone & McCarthy Research Associates. The yen weakened on speculation deflation will prompt the Bank of Japan to keep its benchmark rate at 0.1 percent through this year, according to a Bloomberg News survey of economists. A report yesterday showed that a broad measure of prices fell the most in more than half a century, and economists including Takahide Kiuchi say the bank may be compelled to add credit to the economy later this year. “Deflation is deepening, so the government may resume pressure on the BOJ to fight deflation in the months ahead,” said Kiuchi, chief economist at Nomura Securities Co. in Tokyo. “There’s a chance for a further action by the BOJ if the yen strengthens and stocks slump again.”

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