The dollar fell against all of its major counterparts as signs of U.S. economic recovery spurred demand for higher-yielding assets, including stocks. The U.S. currency weakened against the yen for an eighth consecutive session, the longest streak since 2004, even after Japan’s Finance Minister Yoshihiko Noda said yesterday the nation would take “bold” action to prevent an overvalued yen. The greenback weakened against the New Zealand and Australian dollars before a U.S. report tomorrow forecast to show initial jobless claims fell. Taiwan’s dollar rose to a 13-year high on the prospect of an increase in interest rates. “We have a risk-on feel,” said David Watt, senior currency strategist at Royal Bank of Canada’s RBC Capital unit in Toronto. “There is a better expectation that risk-on trades will do better next year with copper, oil rising and stocks are elevated. People have optimism for 2011, after a harder 2010.” The dollar dropped 0.5 percent against the yen to 81.98 at 9:33 a.m. in New York, from 82.38 yesterday. The U.S. currency weakened 0.2 percent to $1.3144 versus the euro, compared with $1.3115. The euro fell 0.3 percent to 107.71 yen, from 108.06. The U.S. currency has lost 2 percent in 2010, according Bloomberg Correlation-Weighted Indexes. The yen has surged 12.8 percent this year, according to the index, which measures currency performance of 10 major trading partners and the euro has slumped 10.9 percent since Jan. 1. Yen Watch Japanese Finance Minister Noda, in a news conference in Tokyo, called the yen’s recent gains “one-sided.” Noda said he will keep closely watching markets. Taiwan’s dollar advanced versus the greenback as economists surveyed by Bloomberg News said the central bank’s discount rate on 10-day loans will be raised by 12.5 basis points to 1.625 percent at a policy meeting tomorrow. Borrowing costs in Taiwan were increased by similar amounts in June and September, and the current level of 1.5 percent compares with an inflation rate of 1.53 percent. A basis point equals 0.01 percentage point. “The market is quite certain the central bank will raise rates tomorrow,” said Tarsicio Tong, a Taipei-based currency trader at Union Bank of Taiwan. “Real interest rates are still in negative territory. The bond market is still reflecting inflation worries.” Taiwan Dollar Taiwan’s dollar touched NT$29.377, the strongest level since October 1997. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, was little changed at 115.49 after reaching 115.50, the highest since Nov. 18. The Standard & Poor’s 500 Index gained 0.2 percent. The U.S. dollar depreciated 1 percent to 76.33 cents versus New Zealand’s kiwi, from 75.56 yesterday. The U.S. currency slid for an eighth day against the Australian dollar, weakening 0.4 percent to $1.0143, from $1.0100. The greenback’s stretch of decreases versus the Aussie is the longest since March 2009. Benchmark interest rates of 4.75 percent in Australia and 3 percent in New Zealand make the South Pacific nations’ assets attractive to investors seeking higher returns, also boosting the Aussie and kiwi. Dollar Index IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, dropped 0.2 percent to 80.208, trimming its 2010 increase to 3.1 percent. Sweden’s krona appreciated 0.3 percent to 6.8525 per dollar after a report showed the nation’s trade surplus reached the highest this year as exports increased. Riksbank Governor Stefan Ingves has raised the benchmark repo rate four times since July even as inflation remains below the bank’s 2 percent target. The increases have been made as house prices move above pre-crisis levels and credit growth hovers near 9 percent. First-time filings for U.S. jobless insurance decreased to 415,000 in the week ended Dec. 25 from 420,000 in the previous week, according to the median forecast of 26 economists in a Bloomberg News survey. The report from the Labor Department is due tomorrow. The Federal Reserve reiterated this month its commitment to keeping borrowing costs low for an “extended period” as data signals an uneven recovery in the world’s largest economy. The central bank said last month it will buy $600 billion of Treasuries through June to boost the economy under the second round of quantitative easing. To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net; Paul Dobson in London at pdobson2@bloomberg.net To contact the editor responsible for this story: Robert Burgess at bburgess@bloomberg.net

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