The dollar was near a one-week low against the yen on prospects yields on U.S. assets will shrink as Federal Reserve policy makers prepare to discuss interest rates and bond purchases. The greenback held yesterday’s loss against the euro on speculation the Fed will signal today it’s open to increasing debt purchases beyond the $600 billion already announced. New Zealand’s dollar was near a 10-year low against Australia’s currency after a report showed retail sales in the smaller nation slid by the most since 1997. Taiwan’s dollar climbed to a 13-year high as strengthening trade with China helped attract funds to the island’s assets. “People will need more time to see whether the U.S. economic recovery is sustainable enough to drive up yields in a good way,” said Tetsuya Inoue, chief researcher for financial markets at Nomura Research Institute in Tokyo, a unit of Japan’s largest brokerage. “As the economy improves, U.S. investors will take risk and want to invest money overseas in search of higher yields. That may keep the dollar from rebounding.” The dollar fetched 83.47 yen as of 2:28 p.m. in Tokyo from 83.39 yen in New York yesterday, when it touched 83.11 yen, the lowest since Dec. 7. The U.S. currency was little changed at $1.3394 per euro after reaching $1.3434 yesterday, the weakest since Dec. 6. The yen was at 111.79 per euro from 111.67, after touching 112.07 yen yesterday, the lowest since Nov. 23. Treasury Yields The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, was at 79.327 today after declining 1 percent yesterday. Ten-year Treasury yields were little changed at 3.279 percent today, according to BGCantor Market Data, after falling to 3.275 percent yesterday. 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.” Buying more government bonds is “certainly possible,” Fed Chairman Ben S. Bernanke said in an interview broadcast on CBS Corp.’s “60 Minutes” on Dec. 5, referring to the Fed’s policy of quantitative easing. Demand for the yen was limited as the MSCI Asia Pacific Index of regional shares advanced 0.4 percent today. The Reuters/Jefferies CRB Index of raw materials rose 1.6 percent yesterday. Retail Sales “As the market stabilizes, people are likely to take advantage of excessive liquidity in markets and start buying stocks and commodities,” said Yousuke Hosokawa, a senior currency dealer in Tokyo at Chuo Mitsui Trust & Banking Co., a unit of Japan’s seventh-largest bank. “Cross currencies are poised to gain against the yen. After all, there are few reasons to buy the yen except for risk aversion.” U.S. retail sales rose 0.6 percent in November after adding 1.2 percent in October, according to the median estimate of economists in a Bloomberg survey before Commerce Department data today. Wholesale costs rose 0.6 percent in November after gaining 0.4 percent in October, another survey showed. The euro was little changed ahead of data forecast to show German investor confidence rose for a second month and a confidence vote in Italy that may topple Prime Minister Silvio Berlusconi’s government. German Sentiment 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. Lawmakers in Rome are scheduled to vote on a no-confidence motion today, and the motion hangs on seven members of the 630- seat lower house, according to the Corriere della Sera newspaper. A loss for Berlusconi may lead to early elections or wrangling to form a new coalition. 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.” Taiwan Inflows New Zealand’s dollar reached NZ$1.3288 per Aussie dollar today, the weakest since November 2000. Taiwan’s dollar today touched NT$29.904, the strongest level since October 1997. Global funds bought $1.3 billion more local shares than they sold this month through yesterday, boosting net purchases for the year to $7.8 billion. “Strong foreign inflows and solid economic growth are drivers of the Taiwan dollar’s gain,” said Henry Lin, a Taipei- based foreign-exchange trader at Taiwan Shin Kong Commercial Bank. “The central bank won’t allow such a big rise in the currency. It’ll come in to smooth the moves very soon.” The Taiwan dollar gained 2.3 percent to NT$29.919 versus the greenback. To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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