The dollar fell for a second day against the euro as Asian stocks advanced on speculation the worldwide economic recovery is building momentum, reducing demand for safer assets. The greenback declined to a 10-week low against the pound after a national research group said the Bank of England will raise interest rates three times this year. Australia’s dollar climbed after the central bank said there are signs of rising private investment in the nation. South Korea’s won strengthened after a government report showed exports increased. “Worldwide growth is looking strong,” said Adam Carr, a senior economist in Sydney at ICAP Australia Ltd., a unit of the world’s largest interdealer broker. “This is likely to support risk appetite and weigh on the dollar and the yen while boosting the euro.” The dollar dropped to $1.3714 per euro at 8:40 a.m. in London from $1.3694 in New York yesterday. It depreciated 0.3 percent to $1.6054 per pound, after slipping to $1.6079, the weakest since Nov. 22. The U.S. currency declined to 81.89 yen from 82.04 yen, after earlier touching 81.76 yen, the lowest level since Jan. 4. The yen was at 112.27 per euro from 112.34. The U.S. and Japanese currencies declined versus most of their major counterparts as the MSCI Asia Pacific Index of shares rose 0.3 percent and the Nikkei 225 Stock Average advanced 0.4 percent. U.S., Germany Economists predict a U.S. report today will show manufacturing grew for an 18th month. The Institute for Supply Management’s factory index was 58 in January from an eight-month high of 58.5 in December, according to a Bloomberg survey. Readings above 50 signal growth. The number of people out of work in Germany fell 10,000 in January, after rising 3,000 in December, a separate survey showed before the data today. The pound gained after the National Institute for Economic and Social Research predicted the U.K.’s benchmark rate would rise to 1.25 percent by year-end, compared with an October forecast of 0.75 percent. The institute increased its 2011 inflation forecast to 3.8 percent from 2.8 percent. “Expectations are growing for higher U.K. borrowing costs,” said Takashi Kudo, general manager of market information services at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. in Tokyo. “This is leading to buying of the pound.” The U.K. currency climbed to 131.45 yen from 131.38 yen, and rose to 85.42 pence per euro from 85.51 pence. RBA Decision Australia’s dollar advanced above parity with its U.S. counterpart after today’s central bank monetary-policy meeting. Reserve Bank of Australia Governor Glenn Stevens and his board left the benchmark interest rate unchanged and signaled inflation was likely to remain within its 2 percent to 3 percent target range over the year ahead. The central bank’s decision was expected by all 22 economists surveyed by Bloomberg. “The RBA is not in any immediate hurry to change rates in either direction,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “The Aussie is going to struggle to make too much headway from here, and there’s always that risk of having a correction.” The benchmark rate of 4.75 percent in Australia compares with as low as zero in the U.S. and Japan, attracting investors to the South Pacific nation’s higher-yielding assets. The risk in such trades is that currency market moves will erase profits. Australia’s dollar rose 0.6 percent to $1.0033, after climbing to as high as $1.0039, the strongest since Jan. 19. It gained 0.4 percent to 82.12 yen. South Korea’s Won The won strengthened versus 14 of its 16 major counterparts after the Ministry of Knowledge Economy said exports rose 46 percent in January from a year earlier, more than the 39.1 percent gain forecast by economists in a Bloomberg survey. The Kospi stock index gained after a U.S. report yesterday showed consumer spending increased more than forecast and a business barometer rose at the fastest pace since 1988. “There was a lot of news today that boosted risk appetite, whether from Korea or globally,” said Kim Sung Soon, a currency dealer at Industrial Bank of Korea in Seoul. “This was the main reason the won strengthened.” The won gained 0.4 percent to 1,116.95 per dollar. To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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