Yen Tumbles as Global Recovery Signs Reduce Demand for Refuge

The yen touched an eight-week low versus the euro as signs the global economic recovery is gathering steam damped demand for Japan’s currency as a refuge.

The Japanese currency headed for its biggest monthly drop in a year versus the euro before a report tomorrow that may indicate confidence among Japan’s large manufacturers increased, boosting appetite for investments in countries with higher long- term interest rates. The franc climbed to a record against the euro as Swiss leading economic indicators rose in March to the highest level since November 2007.

“There’s a tremendous amount of pressure to push the yen lower in the next few days,” said Sebastien Galy, a currency strategist at BNP Paribas SA in New York. “The market is expecting Japanese institutional investors to be chasing steepness in yield curves globally in relatively safe places.”

The yen depreciated 1.6 percent to 126.40 per euro at 2:01 p.m. in New York, from 124.44 yesterday, after touching 126.56, the weakest level since Feb. 3. It dropped 0.7 percent to 93.39 per dollar, from 92.76, after reaching 93.63, the weakest since Jan. 8. The euro climbed 0.9 percent to $1.3533, from $1.3414.

U.S. 10-year note yields have climbed 63 basis points, or 0.63 percentage point, to 3.82 percent since the end of November. Yields on comparable Japanese securities rose 14 basis points to 1.395 percent.

The Swiss franc gained as much as 0.7 percent to 1.4209 per euro, the strongest since the 16-nation currency’s 1999 debut, before trading at 1.4231, up 0.5 percent. It strengthened 4.2 percent for the quarter.

Monthly Loss

The Japanese currency was poised for a 4.2 percent loss versus the euro this month, the biggest since it tumbled 5.7 percent in March 2009. The yen headed for a 4.8 percent drop against the greenback, its biggest monthly decline this year.

The losses accelerated in New York trading as Japan’s fiscal year ended today, encouraging traders to place fresh bets on yen weakness on speculation Japanese companies had finished sending earnings back home. The yen fell the most this month against the euro among 16 major counterparts, exceeding the 0.3 percent drop of the Swedish krona, the second-worst performer, by more than 10 times.

“The fear was that heading into this fiscal year-end there would have be a significant potential for a pickup in repatriation of earnings back to Japan,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “If those flows have materialized, it’s had very little supportive impact on the yen.”

Yen Outlook

Japan’s currency will probably fall 2.7 percent to 96 versus the dollar in the next six months as the Bank of Japan continues stimulating the economy, Hardman predicted. The Federal Reserve said on March 16 it would stop purchasing mortgage debt this month.

The yen briefly pared losses against the dollar and euro earlier today after a report showed companies in the U.S. unexpectedly cut payrolls in March. The 23,000-position decline shown by data from ADP Employer Services compared with a gain of 40,000 forecast in a Bloomberg News survey.

Today’s advance by the euro reduced its loss against the dollar in the first quarter to 5.5 percent. The drop, on concern Greece’s debt crisis will derail the region’s economic recovery, would still be the worst performance since an 11 percent decrease in the three months ended September 2008.

U.S. Rate Bets

Futures on the CME Group Inc. exchange showed a 56 percent chance the Fed will raise its target rate for overnight lending between banks by at least a quarter-percentage point by its November meeting, compared with 48 percent odds a month ago. The central bank has kept the target interest rate in a range of zero to 0.25 percent since December 2008.

The U.S. Labor Department’s nonfarm jobs report on April 2 is forecast to show employers added 184,000 positions, the most in three years, a Bloomberg survey of 81 economists shows.

Australia’s dollar fell for the first time in three days, dropping as much as 0.7 percent to 91.31 U.S. cents. The Bureau of Statistics said the nation’s retail sales tumbled 1.4 percent in February. Economists in a Bloomberg News survey forecast a 0.3 percent increase.

“That was a very awful set of retail sales numbers with broad-based losses,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong.

The Aussie has climbed 2.3 percent against the greenback this quarter after Reserve Bank of Australia Governor Glenn Stevens raised the benchmark cash target in March to 4 percent.

The U.S. dollar’s share of global currency reserves rose to 62.1 percent in the fourth quarter of 2009, and the euro’s share dropped to 27.4 percent, the International Monetary Fund said today in a quarterly report.

The yen’s share dropped to 3 percent from 3.2 percent and the British pound held at 4.3 percent in the period ended Dec. 31, the Washington-based fund said.

Mexico Peso, Bonds Gain as Debt Eligible for Citigroup Index

Mexico’s peso advanced to a 17- month-high and local bonds gained as Citigroup Inc. said the country’s securities are eligible to be included in its World Government Bond Index, helping luring foreign investors.

The peso jumped as much as 0.6 percent today, extending a 6.1 percent rally that has made it the best performer among the 16 most-traded currencies in the world this year. The yield on the country’s benchmark peso bonds due in 2024 fell five basis points to a one-month low of 7.92 percent on speculation Citigroup’s move will prompt investors who use the index as a benchmark to buy Mexican securities.

“This adds to the positive sentiment to the peso,” said Flavia Cattan-Naslausky, an analyst with RBS Securities Inc. in Stamford, Connecticut.

The currency was up 0.2 percent today to 12.3379 per U.S. dollar at 1:13 p.m. New York time, after earlier reaching 12.2921, the strongest level since October 2008.

The peso’s surge this year, the most among the 16 major currencies and the second-most among the 26 most-traded emerging market currencies, has been fueled by rising demand for its exports as the U.S. economy, Mexico’s biggest trade partner, recovers from a recession.

The yield on Mexico’s 10 percent peso bonds due in 2024 has declined 35 basis points, or 0.35 percentage point, from 8.27 percent on Dec. 31, according to Banco Santander SA. The price of the securities rose 0.47 centavo to 117.97 centavos per peso today, extending their advance this year to 3.19 centavos.

Put Options

Citigroup said that Mexican debt will join its World Government Bond Index after the county meets the criteria for three straight months, becoming the first Latin American country in the index, Citigroup said in an e-mailed statement. The debt may enter by October, the New York-based bank said in a statement.

Mexico “satisfies all three World Government Bond Index requirements -- size, credit and barriers to entry,” Citigroup said.

Mexico’s central bank is scheduled today to auction $600- million-dollar worth of put options, which allow it to sell the peso for the U.S. currency. Mexico’s central bank started to auction the options in February to accumulate foreign reserves. All of the options the bank sold last month were exercised by investors as the peso strengthened.

Dollar Losing Carry-Trade ‘Allure,’ Morgan Stanley’s Leven Says

The dollar is losing its popularity as a funding currency in the carry trade, in which investors buy higher-yielding assets with amounts borrowed in nations with low interest rates, according to Ronald Leven, a senior currency strategist at Morgan Stanley.

While carry-trade demand is increasing as investors seek riskier assets, rising Treasury yields and speculation the Federal Reserve will rate interest rates sooner rather than later will damp the greenback’s use, New York-based Leven said in an interview yesterday. Low U.S. borrowing costs had encouraged investors to use the dollar instead of the yen.

“It seems anecdotally there’s some shifting away from the dollar,” Leven said. “Now that we’re starting to see the curve in the U.S. steepen and the market is thinking in terms of Fed tightening, the dollar seems to be losing its allure as a funding currency.”

Futures on the CME Group Inc. exchange showed a 44 percent chance Fed policy makers will increase the overnight target rate by at least a quarter-percentage point by the September meeting, compared with 32 percent odds a month ago. The yield curve, which plots the rate of Treasuries according to their maturity, has steepened as the gap between 2- and 10-year yields widened beyond levels last seen during the recovery after the 2001 recession.

In the carry trade, investors put the borrowed money into assets in countries with higher interest rates, such as Australia, where the benchmark is 4 percent, and South Africa, where it is 6.5 percent. Rates are 0.1 percent in Japan and zero to 0.25 percent in the U.S. The risk is that market moves can erase profits.

“The Aussie’s really by measures I think the best carry trade, even across emerging markets -- not the highest on an absolute basis, but by history and volatility,” Leven said.

Rising equity prices should renew interest in carry trade, which is still thin by historical standards, he said.

Canada Dollar Rises as Economy Grows at Fastest in Three Years

Canada’s dollar reached the highest level in almost two weeks versus its U.S. counterpart after a report showed the nation’s economy grew at the fastest pace in three years in January.

Canada’s currency, nicknamed the loonie, is poised for a 3.8 percent gain in the last three months, the fourth consecutive quarterly advance and the longest streak since 1988. Gross domestic product increased 0.6 percent from December, the fifth straight gain and the biggest since December 2006, Statistics Canada said today in Ottawa.

“It’s become typical for data from the Canadian economy to surprise on the upside and strong economic performance pushes the currency higher,” said Aaron Fennell, a futures and currency broker in Toronto at Lind-Waldock, a unit of MF Global Canada. “Looking further into the future, it’s hard to see the Canadian economy and dollar not doing well. It’s a structural bull market for the next decade.”

The Canadian currency appreciated 0.5 percent to C$1.0151 per U.S. dollar at 2:19 p.m. in Toronto, from C$1.0201 yesterday. It touched C$1.0130, the strongest level since March 19. One Canadian dollar buys 98.51 U.S. cents.

Crude for May delivery rose 1.5 percent to $83.62 a barrel on the New York Mercantile Exchange. The Standard & Poor’s 500 Index rose less than 0.1 percent. The loonie tends to track commodities and equities.

‘Solid Momentum’

Economists surveyed by Bloomberg News had predicted the economy would expand 0.5 percent in the first month of 2010, according to the median of 20 estimates.

The report suggests first-quarter economic growth is still coming in faster than the Bank of Canada predicted, after output expanded at the highest quarterly rate since 2000 in the October-December period.

“There are some good signs, there are some consistent signs,” in Canada’s economy, Finance Minister Jim Flaherty told reporters in Ottawa today. “It’s too early to say that we are out of the woods yet.”

Governor Mark Carney signaled last week the central bank may raise interest rates as soon as June as inflation and growth outpace forecasts.

The GDP report “starts the first quarter with solid momentum and fits with that positive vibe the Canadian economy has had for some time,” said David Watt, senior currency strategist in Toronto at Royal Bank of Canada, Canada’s biggest bank. “The takeaway should be positive.”

‘Pressing Parity’

The loonie reached C$1.0062 on March 19, the strongest level since July 23, 2008. The currency rose to parity with the greenback in September 2007 for the first time in three decades amid booming demand for raw materials. It was last at parity on July 22, 2008, and then lost 18 percent that year as the credit crisis crushed demand for commodities.

“The Bank of Canada has been on record saying they’re looking to raise interest rates and tighten liquidity, and there hasn’t been anything to indicate they shouldn’t,” said Lind- Waldock’s Fennell. “That’s why the Canadian dollar is pressing parity. The last time we saw parity a few years ago it didn’t stick. This time it will be a permanent move.”

An hourly close, or a price below the C$1.0154 resistance level at the beginning and end of any given hour of trading, could push the Canadian dollar to C$1.0091 and C$1.0064, George Davis, chief technical analyst in Toronto at Royal Bank of Canada, wrote in a research note.

Resistance refers to areas on charts where buy or sell orders may be clustered and signals a currency may move to the next level if it is exceeded.

Treasuries Gain as ADP Unexpectedly Says Companies Reduced Jobs

Treasuries rose as a report showed companies in the U.S. unexpectedly eliminated jobs in March, encouraging demand for the safety of government debt.

The 10-year note’s yield dropped from almost the highest level since June on evidence the recovery in the labor market will be slow. The government’s payrolls report on April 2 is forecast to show employers added the most jobs since March 2007.

“We are rallying on the back of the release,” said Michael Pond, an interest-rate strategist in New York at Barclays Plc, one of 18 primary dealers that trade directly with the Federal Reserve. “Investors expected a strong employment number at the end of the week and were looking to ADP as the leading indicator.”

The 10-year note’s yield fell 3 basis points, or 0.03 percentage point, to 3.83 percent at 2:19 p.m. in New York, according to BGCantor Market Data. The price of the 3.625 percent security due in February 2020 increased 1/4, or $2.50 per $1,000 face amount, to 98 11/32. The yield touched 3.92 percent on March 25, the highest level since June 11.

Companies cut an estimated 23,000 jobs this month after eliminating 24,000 in February, ADP Employer Services reported. The median forecast of 35 economists in a Bloomberg News survey was for an increase of 40,000 positions.

“A weak ADP caught people by surprise,” said Brian Edmonds, head of interest rates at the primary dealer Cantor Fitzgerald LP in New York. “To have it that weak is eye-opening for the market and for the nonfarm payrolls number on Friday.”

Jefferies View

Investors should sell 10-year notes at yields from 3.77 percent to 3.805 percent, John Spinello, chief technical strategist in New York at the primary dealer Jefferies Group Inc., wrote in a research note today. The market may see a rally if the nonfarm payrolls number is weaker than anticipated, Spinello said in an interview.

The Labor Department will report that employers added 184,000 jobs, according to the median forecast of 81 economists in a Bloomberg survey. The jobless rate probably held at 9.7 percent, according to analysts.

Treasuries have returned 0.9 percent for investors in the first quarter as of yesterday, according to an index compiled by Bank of America Corp.’s Merrill Lynch unit. They have lost 1.1 percent this month.

Atlanta Fed President Dennis Lockhart said he would like to see evidence of recovery in the job market before he supports an increase in the benchmark interest rate from a record low.

‘Looking for Signs’

“I will be looking for signs that employment gains are likely to repeat, accumulate and, once achieved, are likely to be durable,” Lockhart said today in a speech in Hartford, Connecticut. “It is premature to assume an imminent reversal of the Fed’s accommodative policy.”

Interest-rate futures on the CME Group Inc. exchange showed a 44 percent chance that U.S. policy makers will raise the fed funds target by at least a quarter-percentage point by September, compared with 47 percent odds yesterday.

The Fed has kept its target rate for overnight lending in a range of zero to 0.25 percent since December 2008. The central bank is ending today its purchases of $1.25 trillion of mortgage securities and $172 billion of agency debt. It ceased buying Treasuries in October after acquiring $300 billion.

Treasury 10-year note yields have increased 22 basis points this month in the biggest advance since December on speculation the central bank will begin to raise interest rates while the administration of President Barack Obama tries to sustain economic growth with record borrowing.

U.S. Budget Deficit

The budget deficit, which rose to $1.4 trillion in fiscal 2009, will drive Treasury sales to a record $2.43 trillion this year, a February survey of bond-trading companies showed.

Dallas Fed President Richard Fisher said yesterday in Tucson, Arizona, that the U.S. can’t “turn a blind eye” to the effect that the growing federal deficit is having on Treasury yields and the outlook of investors.

The Treasury is scheduled to announce tomorrow it will sell $40 billion in 3-year notes, $21 billion in 10-year notes, $13 billion in 30-year bonds and $8.2 billion in 10-year Treasury Inflation Protected Securities in auctions next week, according to the average forecast of nine primary dealers surveyed by Bloomberg News. The auctions begin April 5.

Treasury 10-year note yields rose last week the most since December as lower-than-average demand at $118 billion in note auctions raised concern that investor interest is waning.

“While the bull market in bonds may have run its course, I would be surprised to see it listed in the obituary section in the newspapers,” Kevin Giddis, head of fixed-income sales, trading and research at the brokerage firm Morgan Keegan Inc. in Memphis, Tennessee, wrote in a note to clients. “The rest of the world is not secure, and the likelihood of another debt crisis is high.”

China May Let Yuan Strengthen Next Month

China may allow its currency to trade freely next month, helping to counter criticism it’s giving its exporters an unfair advantage, said Stephen Jen of BlueGold Capital Management LLP.

“I maintain the view that it is likely that China refloats the renminbi in April,” before a meeting of U.S. and Chinese officials in Beijing, Jen, a managing director at BlueGold in London, wrote in a report to clients today.

Officials in Beijing have resisted allowing gains in the yuan, having controlled its value since July 2008 after it strengthened 21 percent against the dollar in the previous three years. The status quo has drawn criticism from European and U.S. policy makers, who say keeping the currency undervalued has given China’s exporters an edge and is inflating asset bubbles.

Allowing the yuan to gain “should help diffuse much of the risks associated with trade protectionism and allow China to resume building the institutional framework necessary to conduct monetary policies independent from those of the Fed,” said Jen, a former chief currency strategist at Morgan Stanley.

Chinese and U.S. policy makers including U.S. Treasury Secretary Timothy F. Geithner are scheduled to attend a Beijing summit in May, while Geithner’s department is preparing to release its twice yearly currency-market report next month.

The last time the Chinese government revalued the yuan, or renminbi, was on July 21, 2005, when it dropped its currency peg, letting it appreciate 2.1 percent to 8.11 per dollar.

Israel’s Fischer Raises Key Rate for Fourth Time

The Bank of Israel raised its benchmark interest rate for the fourth time since August as inflation expectations increased and the economy expanded.

Governor Stanley Fischer raised the rate by a quarter point to 1.50 percent, the Jerusalem-based central bank said today. Economists were split on whether the bank would tighten credit today with six surveyed by Bloomberg predicting the decision and eight expecting no change.

“Raising the rate now broadcasts a determined message in the face of the recent increase in inflation expectations and will prevent unnecessary increases in the future,” said Rafael Gozlan, chief economist at Tel Aviv-based Leader Capital Markets Ltd., who predicted the rise.

Economic growth accelerated to an annualized 4.9 percent in the fourth quarter from 3.6 percent in the previous three months. The spread between 2013 fixed-rate bonds and inflation- linked bonds with a similar maturity has widened by about 30 basis points this month, indicating that investors are expecting inflation to accelerate.

“The current increase is made against the background of growth that continues to become more firmly based, inflation expectations that are close to the upper limit of the target inflation range, and the rise in asset prices,” the Bank of Israel said in an e-mailed statement today.

The benchmark Mimshal Shiklit note due February 2019 fell 0.02 shekel to 108.95 at the close in Tel Aviv and prior to the release of the decision. The yield on the 6 percent security rose one basis point to 4.81 percent, the highest since Feb. 24. The Tel Aviv Stock Exchange is closed Monday and Tuesday for the Passover holiday. The shekel last traded at 3.7365 to the dollar on March 26.

Economic Recovery

Fischer had held the rate since the end of December after increasing it by a quarter-point three times as the economy recovered from the global crisis.

“Most indicators suggest that economic activity continued to expand in the first quarter of 2010, but it seems likely that the rate of increase will be lower than that in the previous quarter,” the bank’s statement said.

The interest rate increase isn’t likely to trigger a significant reaction in the currency or bond market, said Inon Dafni, an economist at Israel Discount Bank Ltd., the country’s third largest lender.

“I don’t expect any real surprise for the bond market as yields were pricing in an interest rate hike,” he said. “The shekel may strengthen, but still there is no major shock here.”

Forecasters on average are expecting the benchmark interest rate to increase to 2.9 percent 12 months from now, the central bank statement said.

Target Range

Inflation expectations for the coming year have risen to 2.9 percent, close to the ceiling of the government’s target range, Alon Katz, head of research at Maor-Luski Investment House in Tel Aviv, said. For the following year, expected inflation is 3.2 percent, he said. The government target for annual inflation is 1 percent to 3 percent.

Bank Leumi Le-Israel Ltd., the country’s largest lender, raised its growth forecast for the year to 3.8 percent from a previous 3.5 percent on March 25.

“The market is signaling to Fischer: Hey, we are concerned about inflation,” Katz said prior to the announcement. “The market had anticipated that he would raise in May or in June. Raising it a month earlier is an important signal. He is saying: ‘I can see what you are afraid of and I’m not going to let it happen.’”

Israel’s benchmark TA-25 stock index surged 75 percent last year, led by Delek Group Ltd., a partner in a gas find at the Tamar field off Haifa’s coast last year. The index has gained about 7.5 percent since the beginning of the year.

Fischer was appointed to a second term on March 17. One of his tasks in the new term will be to implement a new law governing the central bank that calls for the creation of a six- member Monetary Policy Committee. Currently, Fischer has sole responsibility for setting rates.

Canadian Dollar Depreciates Amid Bets Rally Can’t Be Sustained

The Canadian dollar posted its first five-day loss this month amid speculation the rally that pushed the currency to its strongest level against the greenback in almost 20 months could not be sustained.

Canada’s currency, known as the loonie, depreciated against the euro yesterday after European leaders endorsed a plan to assist Greece through a mix of International Monetary Fund and bilateral loans. Bank of Canada Governor Mark Carney signaled the central bank may raise interest rates as soon as June. The nation’s economy grew 0.5 percent in January, according to the median estimate in a Bloomberg survey before a March 31 report.

“The race to parity has taken a pause in the Canadian dollar,” said Kathy Lien, director of currency research at the online currency trader GFT Forex in New York. “Whenever we see an improvement in risk appetite it seems to be more Canada- positive, but this week we didn’t see it participating.”

The currency declined 0.9 percent to C$1.0266 per U.S. dollar yesterday in Toronto, from C$1.0173 on March 19. One Canadian dollar purchases 97.41 U.S. cents. For the week, the Canadian currency fell against 9 of its 16 most-traded counterparts.

The loonie headed for a quarterly gain of 2.6, the second- best performance against the greenback after the Mexican peso.

Crude oil, the nation’s biggest export, fell for a third week, losing 0.7 percent.

‘Expressly Conditional’

The currency reached C$1.0062 on March 19, the strongest level since July 23, 2008, after a report showed consumer prices gained more than forecast in February, driving speculation the Bank of Canada will raise benchmark interest rates before the U.S. Federal Reserve.

The loonie gained March 25 as Carney said in a speech in Ottawa that the bank’s pledge to keep borrowing costs at a record low 0.25 percent through June was “expressly conditional” on the outlook for prices, strengthening earlier language.

The speech “helped firm sentiment that had already been building,” said David Watt, senior currency strategist in Toronto at Royal Bank of Canada. “He was actually not beating back expectations of possibly an early move. He really didn’t express discomfort with the Canadian dollar other than what they’d basically said before and here we are flirting with parity.”

Fiscal Crisis

Canada’s economy expanded at a rate of 0.5 percent in January, a Statistics Canada report is expected to show on Tuesday March 30, according the estimate of 18 economists surveyed by Bloomberg. The nation’s economy grew at a 5 percent annualized rate in the fourth quarter, faster than predicted by the Bank of Canada and the fastest pace since the third quarter of 2000.

Government bonds fell, pushing the yield on Canada’s two- year benchmark up five basis points to 1.69 percent. The 10-year security yield jumped eight basis points to 3.56 percent.

The Canadian dollar has gained 9.6 percent against the euro this year amid concern that Greece’s fiscal crisis will spread to other European nations, damping the region’s growth.

The euro yesterday rose from a more than two-year low against the loonie after European Central Bank President Jean- Claude Trichet blunted criticism of IMF involvement in a rescue plan for Greece, whose budget deficit is more than four times the EU’s limit.

Fitch Ratings cut Portugal’s credit grade on March 24, renewing concern Greece’s fiscal crisis may spread to other European nations.

Five-Year Plan

“Looking at how well Canada has done on a relative basis, it’s because it’s in a much better fiscal situation,” said Sacha Tihanyi, a currency strategist in Toronto at Bank of Nova Scotia.

Canadian Finance Minister Jim Flaherty on March 4 announced a five-year spending plan with cuts to defense, international aid and government operations in a bid to be the first Group of Seven country to erase its deficit after the global financial crisis. He predicted a shortfall narrowing to C$49.2 billion ($47.9 billion) in the 2010-11 fiscal year, down from a record C$53.8 billion last year.

All G-7 countries but Canada and Germany will have debt-to- GDP ratios near or exceeding 100 percent by 2014, John Lipsky, first deputy managing director of the IMF, said on March 21.

Speculative net long positions -- bets that the Canadian currency will rise versus bets that it will fall -- increased to 73,027 contacts on March 23, the most since October 2007, compared with net longs of 69,640 contacts a week earlier, according to data from the Commodity Futures Trading Commission in Washington.

Dollar Heads for Biggest Quarterly Gain Versus Euro Since 2008

The dollar rose, poised for the biggest quarterly gain versus the euro since 2008, as European leaders’ struggle to forge a plan to bail out Greece pushed investors toward the perceived safety of the greenback.

The yen fell against all 16 of its most-traded counterparts this week as Japanese consumer prices dropped for a 12th month, increasing the chances the nation’s central bank will lag behind its peers in raising interest rates. The U.S. economy added jobs in March, a report is forecast to show next week.

“The dollar is still the safety currency,” said Jonathan Xiong, a senior portfolio manager and director at Mellon Capital Management Corp. in San Francisco, where he helps oversee $18 billion. “The European news that is coming out is unclear, clouded and uncertain. When investors are uncertain, what happens is they buy dollars.”

The dollar appreciated 0.9 percent to $1.3410 versus the euro, from $1.3530 a week earlier. It was headed for a gain of 6.8 percent for the quarter, the largest since it advanced 11.8 percent in the three months ended in September 2008.

The yen dropped 2.1 percent, the most since Dec. 4, to 92.52 per dollar, from 90.54 yen on March 19. It was set for a decline of 3.8 percent this month, the most since December. The euro rose 1.3 percent to 124.06 yen, from 122.51 last week.

IMF on Standby

The European currency strengthened yesterday after leaders of the 16 nations that use the euro put the International Monetary Fund on standby to aid debt-stricken Greece, seeking to snuff out a threat to the currency’s stability. They endorsed a plan that calls for a mix of IMF and bilateral loans at market interest rates, while voicing confidence Greece won’t need outside help to cut its budget deficit, Europe’s largest.

European Central Bank President Jean-Claude Trichet told reporters in Brussels late on March 25 he was “extraordinarily happy that the governments of the euro area found out a workable solution.”

Earlier, the euro fell to a 10-month low versus the greenback after Trichet said an IMF role in funding a rescue for Greece would be “very, very bad.” He has expressed concern that turning to the Washington-based IMF would show Europe can’t address its problems.

The number of wagers by hedge funds and other large speculators on a decline in the euro versus the dollar compared with those on a gain -- so-called net shorts -- reached a record 74,917 contracts on March 23, according to Commodity Futures Trading Commission data last week. The amount was 46,341 on March 16.

Australia, Canada

The Australian and Canadian dollars fell versus the greenback for the first week this month amid speculation gains versus the U.S. dollar and the euro couldn’t be sustained.

Australia’s currency dropped 1.2 percent to 90.41 U.S. cents, from 91.54 cents on March 19. It fell 0.4 percent to A$1.4832 per euro, from A$1.4780 a week earlier.

“We’re seeing people get out of positions,” said Lauren Rosborough, a senior currency analyst at Westpac Banking Corp. in London. “The news from euro-zone officials has people looking to go long the euro against the Australian dollar.” A long position is a wager a currency will appreciate.

The loonie, as Canada’s currency is nicknamed, dropped 0.9 percent to C$1.0266 per U.S. dollar, while remaining near the strongest level in 20 months versus the greenback.

The U.S. currency rose against the yen before a report next week that’s expected to show the U.S. gained jobs in March, increasing the likelihood the Federal Reserve will raise interest rates before the Bank of Japan.

U.S. Employment

U.S. payrolls added 190,000 jobs in March, according to the median forecast of 62 economists surveyed by Bloomberg News before the Labor Department releases the data April 2. The economy lost 36,000 jobs in February.

Japan’s consumer prices excluding fresh food slid 1.2 percent from a year earlier, after dropping a 1.3 percent in each of the preceding two months, the nation’s statistics bureau said yesterday in Tokyo. The data intensifies pressure on the central bank to eradicate the deflation that’s hampering the economic recovery.

Mexico’s peso was the only major currency that gained against the dollar this week, as an economic recovery in the U.S. fueled demand for the Latin American nation’s exports.

The peso gained 0.7 percent to 12.4962 per U.S. dollar, from 12.5854 on March 19. It has strengthened during six of the past seven weeks against the dollar.

The Mexican currency gained 4.8 percent against the dollar this year, the best performance among the 16 major currencies tracked by Bloomberg.

Yuan forwards strengthened yesterday after a central-bank adviser said China may resume a “managed float” of the currency, bolstering optimism the government will allow appreciation.

Twelve-month non-deliverable forwards rose as much as 0.2 percent to 6.6675 per dollar, according to data compiled by Bloomberg. The contracts reflect bets the currency will gain 2.3 percent from the spot rate of 6.8270.

Japan’s Yields to Reach 17-Month High Next Quarter

Japan’s 10-year bond yields may rise to the highest since October 2008 next quarter, following seasonal patterns where they climb on speculation U.S. interest rates will increase, Mizuho Securities Co. said.

“The tendency of Japan’s long-term yields to gain in the April-June period will remain intact this year,” said Hajime Takata, Tokyo-based chief strategist at Mizuho. “It wouldn’t be surprising if the yields rose above 1.6 percent.”

The yield on Japan’s 10-year notes rose in the second quarter of each of the past six fiscal years, according to data compiled by Bloomberg. The rate peaked between April and June in all those periods except for fiscal 2005. In the current year ending on March 31, the yield reached a high of 1.56 percent on June 11.

The U.S. outlook is the main factor driving the seasonal pattern, Takata said. Inflation expectations and recovery optimism in the world’s largest economy have tended to heighten in the second quarter of each year since 2004, prompting Japan’s yields to gain amid speculation the Federal Reserve would tighten monetary policy, he said.

Japan’s 10-year bonds headed for a fourth weekly loss, pushing up the yield to 1.38 percent as of 11:15 a.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The U.S. 10-year Treasury yield was at 3.86 percent, near to the highest since June 11, according to data compiled by Bloomberg.

Recent economic indicators signal a recovery is taking hold in the U.S., aiding a rally in stocks that will likely help to improve investor sentiment, Takata said.

“From April, the speculation about tightening will push up U.S. two-year yields and 10-year yields will likely rise above the key 4 percent level,” he said.

Still, the Fed probably will delay interest-rate increases until next year or 2012, Takata said.

“It’s highly likely U.S. yields will reverse to a decline from the summer as they did in the past few years,” he said. “Japan’s long-term yields will move in a range below 1.5 percent after temporary gains.”

Japan Bonds Fall, Post 4th Weekly Loss on Stock Gains, Recovery

Japan’s 10-year bonds dropped for a second day, completing a fourth weekly loss, as the yen’s slide to its lowest since January bolstered exporters’ stocks.

Ten-year yields climbed to the highest level since November after Treasuries dropped yesterday, boosting U.S. rates to the most since June. Demand for bonds was also limited on speculation the Bank of Japan’s key survey of business confidence and U.S. nonfarm payrolls next week will add to signs the global economy is recovering.

“Japanese and U.S. yields are to test the higher end of their ranges,” said Shinji Nomura, chief debt strategist in Tokyo at Nikko Cordial Securities Inc., part of Japan’s third- largest banking group. “Optimism over the BOJ’s Tankan and U.S. nonfarm payrolls next week are negative factors for bonds.”

The yield on the 1.4 percent security maturing in March 2020 increased 1.5 basis points, or 0.015 percentage point, to 1.375 percent as of 4:13 p.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price dropped 0.132 yen to 100.219 yen.

Benchmark yields, which ended last week at 1.36 percent, earlier increased to 1.385 percent, the highest since Nov. 12.

Ten-year Treasury yields reached 3.92 percent yesterday, the highest since June 11. They were at 3.86 percent today.

Futures MACD

Ten-year bond futures for June delivery dropped 0.23 to 138.33 as of the afternoon close at the Tokyo Stock Exchange. The contracts earlier touched 138.16, the lowest since November. The contracts’ moving average convergence/divergence, or MACD, was minus 0.2719 today, below the so-called signal line of minus 0.1569, suggesting that they are in a downtrend.

The Nikkei 225 Stock Average advanced 1.6 percent, damping demand for the refuge of government debt.

Shares gained after Japan’s currency touched 92.96 yen yesterday, the weakest level since Jan. 8. It traded at 92.57 yen per dollar today, after falling for the past three days.

Japanese bonds were little changed on the month and quarter, according to indexes compiled by Bank of America Corp.’s Merrill Lynch unit. The Nikkei 225 gained 8.6 percent so far this month, advancing 4.3 percent this quarter.

Bond losses were tempered on expectations lingering deflation will increase the value of coupon payments.

Japan’s consumer prices excluding fresh food slid 1.2 percent in February from a year earlier, after dropping 1.3 percent in each of the past two months, the statistics bureau said today in Tokyo.

Lingering Deflation

“An end to deflation isn’t in sight anytime soon, though the pace of price declines will moderate gradually,” Azusa Kato, economist at BNP Paribas in Tokyo, said before the data.

The difference between yields on five-year notes and similar maturity inflation-linked debt, which reflects the outlook for consumer prices over the term of the securities, was negative 1.05 percentage points today, compared with minus 0.85 percentage points at the end of last year.

Inflation-adjusted securities typically yield less than regular bonds because their principal payments increase at the same rate as inflation.

Ten-year yields may rise to the highest since October 2008 next quarter, following seasonal patterns where they climb on speculation U.S. interest rates will increase, Mizuho Securities Co. said.

Yield Outlook

“The tendency of Japan’s long-term yields to gain in the April-June period will remain intact this year,” said Hajime Takata, Tokyo-based chief strategist at Mizuho. “It wouldn’t be surprising if the yields rose above 1.6 percent.”

The yield on Japan’s 10-year notes increased in the second quarter of each of the past six fiscal years. The rate peaked between April and June in all those periods except for fiscal 2005. In the current year ending on March 31, the yield reached a high of 1.56 percent on June 11.

Recent economic indicators signal a recovery is taking hold in the U.S., aiding a rally in stocks that will likely help to improve investor sentiment, Takata said.

A U.S. report on April 2 will show payrolls rose 187,000 in March after dropping 36,000 the previous month, according to the median estimate of economists surveyed by Bloomberg.

Japan’s Tankan business confidence index will improve to minus 14, from December’s minus 24, according to the median estimate of economists in a Bloomberg News survey before the April 1 report. That would be the best reading since December 2008.

Petrobras Sees $25 Billion Share Sale

Petroleo Brasileiro SA, Brazil’s state-controlled oil company, estimates it may raise $15 billion to $25 billion from minority shareholders in a planned share sale, Chief Executive Officer Jose Sergio Gabrielli said.

The estimate is part of simulations to forecast the company’s debt in coming years, he said today on a conference call with analysts and investors.

“It was only an exercise,” he said. “Any estimate at this moment for the capital increase is mere speculation.”

Petrobras plans to invest between $200 billion and $220 billion in five years to tap Tupi, the Americas’ biggest crude find since Mexico’s Cantarell in 1976, and other discoveries. The plan depends on approval of the share sale by lawmakers, Gabrielli said.

The bill allowing the share sale is one of four proposals President Luiz Inacio Lula da Silva sent to Congress last year to govern the country’s oil reserves in the pre-salt area off Brazil’s southeastern coast. The offering also involves giving new shares to the government in return for oil reserves.

Gabrielli said the company expects final approval in Congress and a presidential sanction of Brazil’s new oil regulation by June 4. The company will need to seek an “alternative” if Congress doesn’t approve the offering, he said, without elaborating.

Petrobras expects to begin producing 100,000 barrels a day in October at Tupi, Gabrielli said. He also said the company has had “good results” drilling one well owned by the government as part of the oil-for-shares plan.

Petrobras rose 1.2 percent to 36.25 reais in Sao Paulo trading at 11:54 a.m. New York time. Earlier it gained 2.1 percent, the most since March 9.

Citizens Taps Market With Yields Low and Storms on the Rise

Citizens Property Insurance Corp., largest real-estate insurer, starts marketing $2 billion in tax-exempt senior bonds to institutional investors with attractive yields amid reports of a high hurricane season.

After a below-average hurricane season in 2009, this year’s projection compares with several years when the eastern U.S. and Gulf coasts were badly hit, according to Accuweather.com chief long-range meteorologist whose official was released March 14. Five hurricanes are predicted, with two or three being major landfalls, Bastardi said.

Citizens yesterday was offering yields ranging from 2.83 percent for three-year debt to 4.45 percent for 2017 maturities, the chief executive officer of Asset Preservation Advisors, an Atlanta-based firm that invests $1.4 billion in municipal bonds. Yesterday was the second day of retail sales for the insurance fund.

The borrower is taking advantage of the low yields being paid for similar maturities relative to Treasuries, Woods said. Three-year, tax-exempt general obligations with a AAA credit rating, offer a yield that is 58 percent of comparable Treasuries, according to data compiled by Bloomberg. In April when Citizens last came to market, the ratio was 91 percent of the equivalent Treasury. The note yesterday paid 87 basis points compared with 151 basis points on the three-year sovereign.

“The yields they are talking about in the long end are not that attractive given the risk,” Woods said. “That part of the yield curve is very, very expensive.”

Finance for Claims

The issue, which includes short-term notes as well as floating-rate securities, will provide financing to pay claims during the 2010 hurricane season. Underwriters led by JPMorgan Chase & Co. are marketing the securities, which are rated A+ by Standard & Poor’s, the fifth-highest of 10 investment grades, and A2 by Moody’s Investors Service, the sixth-highest.

“Strong retail orders to set the stage for the day of institutional pricing is very important to us,” Citizens’ chief financial officer. “Last year retail comprised a meaningful amount of the total.”

Yields on top-rated general obligations maturing in seven years rose two basis points yesterday, according to a daily survey by Concord, Massachusetts-based Municipal Market Advisors. The 2.37 percent is three basis points above the all- time low. A basis point equals 0.01 percentage point.

“The municipal market is primed for a good rally,” a money manager with New York’s AllianceBernstein LP, which oversees $30 billion in municipal bonds. “I think the market will rally in the coming months as supply diminishes and pressure for higher tax rates continues to build.”

Following are descriptions of pending sales of municipal debt in the U.S.:

plans to sell $897.8 million in tax-exempts tomorrow secured by a senior lien on the revenue of Los Angeles International Airport, according to S&P. LAX is the world’s seventh-busiest airport by passenger traffic, one rank lower than a year ago, Airports Council International said March 17. Proceeds will help fund a $5.6 billion capital improvement plan. The department will issue about $1.9 billion in additional securities after this sale, S&P said. Underwriters led by Siebert Brandford Shank & Co. LLC will market the bonds to investors. S&P and Fitch rated the debt AA and Moody’s assigned Aa3. (Updated March 23)

plans to market $850 million in tax-exempt, fixed-rate bonds March 25. The monopoly power utility will back them with net revenue from the system, Moody’s said. The tax-exempts are the first in a series of sales totaling $1.9 billion, S&P said. Proceeds will help pay down outstanding lines of credit, refinance existing debt and help pay for a capital investment program, S&P said. The securities will be marketed by JPMorgan Chase & Co. and are rated BBB+, the third-lowest investment grade, by Fitch Ratings and S&P, and one notch higher, A3, by Moody’s. (Updated March 23)

CHICAGO TRANSIT AUTHORITY, which manages the second-largest public transportation system in the U.S., plans to sell $550 million in sales-tax revenue bonds today to help finance train upgrades. The CTA will acquire 406 new cars to replace equipment that’s 30 to 40 years old, according to the agency. The total cost of the purchase will be $674 million, the CTA said. Additional funding will come from the Federal Transit Administration and the Illinois Department of Transportation. Underwriters led by Goldman Sachs Group Inc. will market the securities, including $475 million in Build America Bonds. CTA debt is rated A1 by Moody’s and AA by S&P. (Updated March 23)

with nine academic locations and six health institutions, plans to sell $373.3 million of fixed-rate revenue bonds today. Proceeds from the tax-exempts will refinance outstanding debt. The Austin-based system sold $331.4 million of tax-exempt securities last week with yields ranging from 0.66 percent on notes maturing in 2012 to 3.5 percent on those due in 2024. They will be marketed by RBC Capital Markets, a unit of Royal Bank of Canada. The securities are rated AAA by S&P and Fitch, and Aaa by Moody’s. (Updated March 23)

European Central Bank President campaign for governments to learn the lessons of the Greek fiscal crisis may provoke a transatlantic policy split that forces the euro back toward its lows of 2006.

As investors push Greece, Portugal and Ireland to deliver on plans to cut budget deficits, the withdrawal of stimulus raises the risk of and even deflation in all or parts of the 16-nation euro area. The possibility of slower expansion is prompting economists from Deutsche Bank AG to HSBC Holdings Plc to predict Trichet’s ECB will be slower than they previously anticipated in raising its from a record low of 1 percent.

Trichet’s restraint would contrast with Federal Reserve Chairman if the U.S. central banker takes the lead in tightening economic policy while lawmakers show few signs of attacking a budget gap of more than 10 percent of gross domestic product. Such different approaches across the world’s biggest economies has BlueGold Capital Management LLP predicting the euro will fall to $1.20 for the first time since March 2006, echoing a decline when the Fed last outpaced the ECB in the middle of the last decade.

“This policy divergence is one of the central pillars of my view going forward,” said managing director of hedge-fund manager BlueGold in London and a former chief currency strategist at Morgan Stanley. “It is one more reason for investors to be cautious about the euro.”

Contrasting Policies

Europe’s single currency fell 0.3 percent to $1.3515 at 8:50 a.m. in London today, taking its decline in the past four months to 10 percent, amid speculation European Union leaders will fail to agree on an aid package for Greece this week.

When the Fed last began raising interest rates, from 1 percent in June 2004, it overtook the ECB’s benchmark 2 percent by December and had increased the overnight lending rate between banks another seven times before the Frankfurt-based ECB first shifted its benchmark in the final month of 2005. That helped push the euro down 13 percent against the dollar in 2005, when it traded as low as $1.164 that November after three years of gains.

“We’re shorting the euro,” , a fund manager at Ignis Asset Management in Glasgow, which manages the equivalent of about $107 billion. “It’s impossible to see the ECB raising rates anytime soon in the current environment and certainly not before the Fed.”

Holding Pattern

Part of the reason for the ECB’s holding pattern is the growing likelihood of fiscal retrenchment. Governments have violated the EU’s deficit limit of 3 percent of gross domestic product for a third of the euro’s first decade. Now the turmoil in Greece is forcing them to consider greater fiscal discipline after investors more than doubled the they demand on Greek 10-year bonds over their German equivalents amid its struggles to cut a 12.7 percent budget gap, the most in the euro zone.

Greece has passed three packages of deficit-reduction measures this year, including cuts totaling 4.8 billion euros ($6.5 billion) announced March 3, in a bid to lop four percentage points off its budget gap this year. The between yields on 10-year Greek and German bonds jumped to as high as 396 basis points in January from as low as 132 basis points in November. The gap was 326 basis points today.

‘Unusual Fiscal Discipline’

Other countries are seeking to avoid Greece’s fate, with most pledging to satisfy the EU’s deficit rule by 2013 at the latest after the European Commission estimated the euro area’s overall gap jumped to 6.4 percent last year from 2 percent in 2008. It predicts an increase to 6.9 percent in 2010.

Spain is enacting 50 billion euros of cuts and has proposed raising the retirement age two years to 67 to pare a 10.1 percent gap, while Portugal is planning 6 billion euros of measures including asset sales to reduce an 8 percent deficit. Ireland has won plaudits for its plan to shrink an 11.7 percent shortfall by reducing public workers’ wages and some welfare payments.

“Events in Greece could trigger unusual fiscal discipline in the euro area, implying tighter policy than expected,” chief French economist at Barclays Capital in Paris, who estimates the euro-area deficit will fall to 5.8 percent of GDP next year, compared with the European Commission’s 6.5 percent estimate in November.

Reduced Forecast

Such discipline may go some way toward appeasing Trichet. He has called deficits a “potential burden” on monetary policy and said in a March 12 Bloomberg Radio interview that governments must act “with utmost energy” to convince investors they can restore sustainability.

Their budget cuts “could add further gloom to growth prospects in the near future but also plead for long-lasting accommodative monetary policy,” Boone said, predicting the ECB will keep its key rate unchanged this year.

Deutsche Bank economists last month cut their forecast to show the ECB raising its benchmark interest rate by 50 basis points in the final quarter, half what they previously predicted. Their counterparts at HSBC said yesterday they now expect the central bank to stay on hold until March 2011 rather than shift before the end of this year.

At Morgan Stanley, Chief European Economist in London is less convinced that tougher fiscal policy will be the reason the ECB waits. She argues the region’s largest economies have yet to detail how they will cut back and estimates the bloc will tighten fiscal policy by just 0.7 percentage point of GDP next year, short of the 0.9 percentage point she calculates is required to fulfill the EU targets.

Stalled Economy

The euro-area economy in the fourth quarter, when it grew 0.1 percent from the prior three months. It will require the support of easy monetary policy if governments carry out their promise to reverse stimulus, an economist at Capital Economics Ltd. in London.

While euro-area surged the most in two decades in January, held at an 11-year high of 9.9 percent and retail sales fell 0.3 percent from December.

Even if the broader economy escapes renewed recession, individual members may not be so lucky, McKeown said. Greece and Spain continued to contract 0.8 percent and respectively through the fourth quarter, while shrank by 0.2 percent after expanding 0.7 percent in the previous three months. Deflation also still poses a “real risk” to the euro area, especially in Spain, Ireland and other nations that suffered when property bubbles burst, she said.

Disaster?

“The ECB will need to keep rates very low for a long time if governments tighten,” McKeown said. “If it doesn’t, it will be disastrous for some economies.”

The outlook may differ in the U.S., with the Fed proving faster than the ECB to raise rates, said head of global economics at Societe Generale SA’s investment-banking division.

She expects the U.S. central bank will begin lifting its near-zero benchmark rate around the end of this year, increasing it to 1.25 percent in 12 months. The ECB’s main rate will still be 1 percent in a year, she said, helping to push the euro to $1.25.

“We see the U.S. leading on monetary-policy tightening,” Marcussen said.

President administration is projecting a of 10.6 percent this year and 8.3 percent next year. Even five years from now, the White House forecasts a budget gap of just below 4 percent of GDP.

‘Enormous Deficits’

Limiting progress this year are mid-term congressional elections, making it unlikely lawmakers will ask voters to pay higher taxes or accept cuts in government programs. A budget commission Obama appointed also isn’t due to release its recommendations until after the November balloting.

“If we do have substantial fiscal tightening, that could mean lower interest rates both at the short end and the long end,” Harvard University Professor said in a March 13 interview. “I wish I saw that happening in the U.S. At this point we’re still looking at these enormous deficits.”

A further decline in the euro will be welcome relief for the European economy by boosting exports, chief European economist at Jeffries Group Inc. in London. A 6 percent drop so far this year in the currency has already handed manufacturers from printing-press maker in Wuerzburg, Germany, to French carmaker an edge to sell their products in international markets.

“The euro system desperately needs a weak euro,” Owen said.

The current crisis also may ultimately spur European officials to toughen their oversight of government policies, resulting in smaller imbalances and a stronger currency union that supports the euro, BlueGold’s Jen said.

“Greece is just the right size to reveal flaws in the system and ensure they’re addressed,” Jen said. “It may be a blessing in disguise.”

Gold Gains Most in a Week as Halt in Dollar Rally Spurs Demand

Gold gained the most in a week as a halt in the dollar’s rally may increase demand for the metal as an alternative investment.

The u.s dollar index, a six-currency gauge of the greenback’s strength, fell as much as 0.4 percent after last week climbing to the highest level in almost seven months. Gold futures, which usually move inversely to the dollar, slid 5.8 percent in three sessions to a three-month low on Feb. 5.

“The dollar is down,” the owner of Quantitative Commodity Research Ltd. in Hainburg, Germany. The metal’s sudden drop last week is also “a good indicator that prices may rise,” he said.

Gold futures for April delivery rose $13.40, or 1.3 percent, to $1,066.20 an ounce on the New York Mercantile Exchange’s Comex unit. That marks the biggest gain since Feb. 1. Futures declined 2.9 percent last week, a fourth straight drop.

In London, gold for immediate delivery fell 48 cents to $1,065.82 at 7:46 p.m. local time.

Gold futures’ relative strength index, a gauge of whether a commodity or security is overbought or oversold, plunged to 40.32 from 50.08 on Feb. 3. “From a technical perspective, gold was heavily oversold,” Fertig said.

Lunar New Year

Physical buying may also support prices before China’s weeklong Lunar New Year holidays start on Feb. 14, London-based broker ODL Securities Ltd. said today in a report.

The dollar index had a third consecutive weekly gain last week as the euro fell on concern that nations such as Greece may struggle to close budget deficits. European finance ministers said at the weekend they will help ensure that Greece tackles its deficit.

“While gold’s longer-term investment credentials remain sound, the metal is temporarily caught up in the slipstream of uncertainty currently being generated,” a senior resource analyst with Mine Life Pty Ltd. in Sydney.

Eight of 16 traders, investors and analysts surveyed by Bloomberg said bullion would fall this week. Six forecast higher prices and two were neutral.

The metal should trade at $1,000 to $1,200 an ounce this year and may advance as high as $1,500 after that, chief executive officer of said today in a television interview. Fourth-quarter profit more than tripled on surging gold prices, the company said.

SPDR Holdings

Bullion held by the biggest exchange- traded fund backed by the metal, increased 1.83 metric tons to 1,106.38 tons as of Feb. 5.

Also in New York, silver futures for March delivery rose 25.5 cents, or 1.7 percent, to $15.085 an ounce. Platinum for April delivery gained $5.90, or 0.4 percent, to $1,481 an ounce. March palladium jumped $9.40, or 2.4 percent, to $407.65 an ounce.

Palladium may average about $400 this year as fundamentals for the market improve, the executive head of Anglo Platinum Ltd.’s commercial unit, said today on a conference call. The metal, used in automotive pollution-control parts, averaged about $267 last year.

Canadian Dollar Gains for Third Straight Week on Rate Bets

The Canadian dollar posted its third consecutive weekly gain amid speculation the Bank of Canada will raise interest rates before the Federal Reserve, increasing the appeal of the nation’s assets.

The loonie, as the currency is known for the image of the waterfowl on the C$1 coin, depreciated today as crude oil fell and India’s central bank unexpectedly increased interest rates. The currency earlier reached C$1.0062, the strongest level since July 23, 2008, after a Statistics Canada report showed consumer prices gained more than forecast last month.

“The market now believes that there will be a forceful move on rates sooner rather than later,” an analyst in Toronto at the online currency-trading firm Oanda Corp. The currency’s decline “will be seen as an opportunity to only add to longer-term investors’ positions.”

The Canadian dollar declined 0.3 percent to C$1.0170 in Toronto at 4:45 p.m., from C$1.0141 yesterday. One Canadian dollar buys 98.33 U.S. cents. Since March 12 the currency has appreciated 0.2 percent.

The Standard & Poor’s 500 Index today fell 0.5 percent and the S&P/TSX Composite Index dropped 0.8 percent. Crude oil fell 1.9 percent. The loonie tends to track movements in stocks and commodities.

Canada’s dollar rose to parity with the greenback in September 2007 for the first time in three decades amid booming demand for raw materials. It was last at parity on July 22, 2008, and then lost 18 percent that year as the credit crisis crushed demand for commodities.

Commodity-linked currencies such as the Canadian and Australian dollars declined after India’s central bank lifted interest rates for the first time since July 2008, stoking concern that withdrawal of economic stimulus measures may hamper global growth.

‘Markets Risk-Off’

“The reason all the markets are risk-off in general today is because the Reserve Bank of India unexpectedly tightened monetary policy,” head of market analysis at Schneider Foreign Exchange in London. “Canada is doing less well than it was vis-a-vis the dollar but it is holding its own, supported by the CPI numbers this morning and the Bank of Canada.”

The Australian dollar fell 0.5 percent against the greenback, while the New Zealand dollar, another currency tied to growth expectations, fell 0.8 percent.

Canada’s dollar surged earlier as consumer prices advanced 0.4 percent in February after a 0.3 percent increase in the prior month. The median forecast of economists in a Bloomberg News survey was for a 0.3 percent increase.

Rate Expectations

“This morning’s high-side surprise in the inflation numbers is ramping up rate hike expectations,” a Montreal-based trader of interest-rate derivatives at brokerage Le Groupe Jitney Inc.

The yield on the December 2010 bankers’ acceptances contract jumped as much as 15 basis points to 1.63 percent, the highest since Jan. 8. Money managers and hedge funds use the contracts to bet on changes in interest rates and manage their exposure. The contracts have settled at an average of 17 basis points above the central bank’s overnight rate since Bloomberg started tracking the gap in 1992.

The Bank of Canada said on March 2 that inflation and economic output have been higher than policy makers expected, signaling rate increases in coming months. Today’s data may intensify calls for tighter monetary policy.

Government Bonds

Canada’s dollar will weaken to C$1.05 by the end of the year, according to the median forecast of economists and analysts surveyed by Bloomberg News. Royal Bank of Canada, the nation’s largest lender, sees it advancing through parity by the end of June before retreating to C$1.02 by year-end.

Canada’s government bonds declined. The two-year note’s surged seven basis points, or 0.07 percentage point, to 1.64 percent. The price of the 1.5 percent security maturing in March 2012 dropped 14 cents to C$99.75.

Canada’s government bonds of one- to three-year duration have made investors 0.5 percent this year, according to a Bank of America Merrill Lynch index.

The dollar may drop against the yen

The dollar may drop against the yen on speculation currency volatility will jump as Japan’s financial markets close for a national holiday on March 22, according to Credit Agricole CIB.

“Traders may not want large positions on concerns about the spring-equinox jinx,” said Yuji Saito, director of the foreign-exchange department in Tokyo at Credit Agricole. “They’re worried there’ll be turbulence again this year.”

In 2008, the dollar on March 17 dropped more than 3 yen to a 14-year low of 95.76 yen as traders cut positions before the holiday on March 20. Last year, the greenback slid almost 3 yen on March 19, the day preceding the break.

“There are a lot of bombshells this year, such as the Greek rescue problem and China’s monetary tightening,” Saito said. The so-called ichimoku chart shows “there could be a market reversal,” he said.

The chart is showing a “twisted” cloud pattern, indicating the dollar is vulnerable, Saito said. The chart analyzes the midpoints of historic highs and lows.

The greenback dropped 0.04 percent this week to 90.52 yen as of 7:40 a.m. in London. It slid to as low as 89.76 yen yesterday, the weakest level since March 9.

South Korea's national oil company is interested in buying

"They have expressed interest in everything -- exploration, production and all the potential downstream activities," said Thomas Manu, director of production at Ghana National Petroleum Corporation (GNPC).

South Korea's national oil company is interested in buying a stake in Ghana's giant Jubilee oil field, the Korean firm and Ghana's state oil agency said on Friday.

Discussions between the two parties were at a preliminary stage, he told Reuters after a delegation from Korea met Ghanaian officials.

"Korea National Oil (Corp) is interested in participating in exploration and also in Kosmos' assets," said KNOC President and Chief Executive Young-won Kang.

GNPC is in protracted talks to buy the Jubilee stake owned by privately-held Kosmos Energy. A Ghanaian government source said in February the government wants to block a reported deal for Kosmos to sell its interest in the field to Exxon Mobil for $4 billion.

"(The Koreans) have expressed interest in buying a portion of it if we acquire it," Manu said.

Jubilee, forecast to begin producing later this year, has recoverable reserves of 800 million barrels, Ghana's Energy Minister Jospeh Oteng-Adjei said last month. (Reporting by Kwasi Kpodo; Editing by Daniel Magnowski and Marguerita Choy)

The euro fell on Friday

The euro fell on Friday over doubts Greece would win euro-zone aid, capping its worst week since January, and concerns about the UK economy hit sterling.

A report on Thursday that Greece saw limited prospects for euro-zone assistance raised concerns about the country's ability to service its debt. On Friday, the euro fell as far as $1.3502, its lowest level in more than two weeks. It was down 1.7 percent this week, its worst showing since late January.

Greece said it may have to turn to the International Monetary Fund for help, though it dismissed news reports it was planning to do so as early as April.

If Greece fails to win euro-zone support, analysts say the market may view the euro zone as unwilling or unable to solve internal financial crises.

"The tensions surrounding Greece are escalating. This whole IMF situation has become a game of brinkmanship and the whole uncertainty is undermining the euro," said Michael Woolfolk, senior currency strategist, at BNY Mellon in New York.

European Union leaders are set to meet next week to discuss rescue plans for Greece. The euro was last trading at 1,3535, down about half a percent, while investors demanded a higher premium to buy 10-year Greek debt over German bunds.

Sterling also fell sharply, dipping briefly below $1.50, after a Bank of England policy maker said there was some risk of a double-dip recession in Britain. The pound was last down about 1.5 percent at $1.5017.

European Central Bank President Jean-Claude Trichet and other officials have ruled out IMF assistance to Greece, but German policy makers have said the IMF may have a role to play.

"From the perspective of the investor, events continue to be frustratingly opaque," said Andrew Wilkinson, senior market analyst at Interactive Brokers Group in Greenwich, Connecticut. "Repeated meetings result in no clear statement other than a commitment that now appears far less solid than before."

A decline in major U.S. stock indexes on Friday reflects heightened risk aversion, BNY Mellon's Woolfolk said, and could spell more trouble for the euro.

"I really don't see any support for the euro. We may have to test that low below $1.3450 in the near term," he said.

YEN FLAT, SWISS FRANC RISES

The dollar was up 0.2 percent at 90.47 yen while the euro fell 0.4 percent to 1.4346 Swiss francs.

Earlier, the euro slipped as far as 1.4320 francs, a 17-month low, following Thursday's remarks from a Swiss National Bank official. Board member Jean-Pierre Danthine said interest rates cannot stay low forever and Swiss firms and consumers should prepare for higher borrowing costs.

But at a policy meeting last week, the SNB's statement did not drop a pledge to counter excessive gains in the franc as it continues to appreciate against the euro.

Traders are focusing on the 1.4300 area, the record low, as the next support level. Options structures were said to be prevalent at that level.

The Canadian dollar gained after Canadian core inflation unexpectedly rose in February. Earlier, the U.S. dollar fell to a 20-month low at C$1.0062, but the greenback recovered to trade up 0.2 percent at C$1.0166.

Gold May Gain on Alternative to Dollar, Low Rates, Survey Shows

Gold may gain on speculation demand will increase as investors seek an alternative to the dollar and low interest rates, a survey showed.

Ten of 17 traders, investors and analysts surveyed by Bloomberg, or 59 percent, said bullion would rise next week. Five forecast lower prices and two were neutral. Gold for delivery in April was up 2.3 percent for this week at $1,126.60 an ounce at 12:46 p.m. in New York yesterday.

The Federal Reserve this week left the federal funds rate target for overnight loans between banks in a range of zero to 0.25 percent, where it’s been since December 2008, and pledged to keep rates “exceptionally low” for an “extended period.” Gold climbed 24 percent last year as central banks maintained low interest rates and spent trillions to stimulate economies.

The Fed decision “will keep the pressure off the dollar from rising in the intermediate term, giving gold room on the upside,” said , an investor in Summit, New Jersey, and a former precious-metals trader for Mitsubishi International Corp.

The red bars on the attached chart are derived by subtracting bearish forecasts from bullish estimates, with readings below zero signaling that most respondents expect a decline. The green line shows the gold price. The data shown are as of March 12.

The weekly gold survey has forecast prices accurately in 174 of 303 weeks, or 57 percent of the time.

Greek Bonds Fall, Extending Weekly Decline, on Funding Concern

Greek government bonds fell, extending their weekly decline, amid deepening concern over how the nation will repay debt and fund its budget shortfall as other European Union members disagree on how to help.

German debt headed for a weekly advance as the split pushed investors to seek safer assets. Greek Prime Minister is racing to secure an explicit pledge of European aid and cut his country’s borrowing costs as 20 billion euros ($27 billion) of debt comes due in the next two months.

“There’s a lot of uncertainty out there and that doesn’t support Greek bonds at the moment,” said , a fixed- income strategist at ING Groep NV in Amsterdam. “There’s some flight to quality, and Germany is performing better than other countries.”

The yield on the 10-year Greek bond rose 4 basis points to 6.38 percent as of 11:27 a.m. in London, and earlier reached the highest since Feb. 26, according to generic data compiled by Bloomberg. It’s headed for a 14-basis-point advance for the week. The 6.25 percent security due in June 2020 fell 0.27, or 2.70 euros per 1,000 euro face amount, to 98.960.

The yield premium investors demand to hold Greek securities instead of German bunds widened to , according to the generic data, the most since Feb. 26.

Widening Spread

That spread widened to as much as 396 basis points on Jan. 28, prompting assurances of a safety net from the euro zone’s 16 nation members and extra austerity measures from Greece. Papandreou says Greece deserves better treatment from markets after presenting the program of spending cuts and tax increases on March 3, which sparked the second national strike in less than two months.

While European finance ministers this week adopted a bailout framework for debt-stricken Greece, German Chancellor government has also signaled it may force Papandreou to seek International Monetary Fund assistance. European Commission President said today he didn’t exclude turning to the IMF for a Greek rescue. Bundesbank board member said Europe should let Greece go bankrupt if it can’t refinance its debts, rather than provide financial aid, Salzburger Nachrichten reported.

“The problem for Greece is that they have been relying on the pledge of guarantees to see the yield spread come down so that they can refinance at a lower rate,” , global head of fixed-income research at HSBC Holdings Plc in London, said in a Bloomberg Television interview. “The markets aren’t silly. They need to see the color of the money. I think that the possibility of more IMF involvement is quite serious.” He called longer-dated Greek bonds “still very good value.”

Bunds Slip

The German bund yield fell 1 basis points to 3.12 percent, headed for a weekly decline of 3 basis points, the first drop since Feb. 26.

“The ten-year bund yield could and should be pushed below 3 percent by all this uncertainty,” , chief economist at High Frequency Economics in Valhalla, New York, wrote in a report today. “Spreads between bunds and riskier euro-denominated sovereign debt should continue to widen.”

Portugal’s 10-year bond yield rose 3 basis points today, widening the yield premium over Germany to 120 basis points. Irish 10-year yields gained 4 basis points, increasing the spread with Germany to 143 basis points.

Canada Dollar Drops for First Time in March as Crude Oil Falls

Canada’s dollar depreciated against its U.S. counterpart for the first time this month as crude oil, the nation’s biggest export, and stocks declined.

Canada’s currency, nicknamed the loonie for the image of the aquatic bird that adorns the C$1 coin, earlier traded within one cent of parity with the greenback for a second day. The loonie yesterday touched C$1.0071, its strongest level against the greenback since July 23, 2008. Government bonds rose.

“Crude is making new intraday lows and that’s weighing on the Canadian dollar,” said , a Montreal-based institutional-derivatives broker at MF Global Canada Co. “It’s only a brief respite before further gains.”

The Canadian currency depreciated 0.2 percent to C$1.0126 at 1:25 p.m. in Toronto, from C$1.0104 yesterday. It earlier reached C$1.0090. One Canadian dollar buys 98.73 U.S. cents.

Crude oil for April delivery fell as much as 1.5 percent to $81.68 a barrel on the New York Mercantile Exchange. The fell 0.2 percent and the S&P/TSX Composite Index, Canada’s equity benchmark, weakened 0.6 percent. Gauges of energy and raw-material producers in the S&P 500 dropped at least 0.8 percent.

The Canadian dollar tends to track movements in stocks and commodities.

The yield on Canada’s two-year security declined two basis points, or 0.02 percentage points, to 1.567 percent. The 1.5 percent note due in March 2012 gained 4 cents to C$99.89.

‘Bearish Tone’

“The Canadian dollar is driven by other majors like the euro, which has accelerated through stops below $1.3650,” said , a currency trader at Desjardins Group in Montreal. Currency markets have “an already bearish tone due to the Greek situation that looks less clear every day.” Stops are automatic trading orders designed to limit losses.

The euro fell as much as 1.1 percent to $1.3587 as Greek Prime Minister set a one-week deadline for the European Union to create a financial aid mechanism for Greece and challenged Germany to give up its doubts about a rescue package.

Papandreou said he may turn to the International Monetary Fund to overcome Greece’s debt crisis unless leaders agree to set up a lending facility at a summit March 25-26. The IMF option has already been dismissed by European Central Bank President and French President , who say it would show the EU can’t solve its own crises.

‘Contradictory News’

“There’s so much contradictory news coming out of Greece,” , chief economics and rates strategist at Toronto-Dominion Bank. “There’s moderate safe haven effect that’s favoring the U.S. dollar. It really seems to be a risk off day.”

The Canadian currency has gained in 13 of the last 15 sessions, and appreciated 2.1 percent against the greenback since March 2, when the Bank of Canada said the nation’s inflation and economic output have been higher than expected. The comments spurred speculation the central bank will raise benchmark interest rates before the Federal Reserve.

‘Bit of Breather’

“The market is taking a little bit of breather after such a one-way move,” said , director of foreign- exchange trading in Toronto at Bank of Nova Scotia. “You can’t go one way all the time.”

Canada’s dollar rose to par with the greenback in September 2007 for the first time in three decades amid booming demand for raw materials. It was last at parity on July 22, 2008, and then lost 18 percent that year as the credit crisis crushed demand for commodities.

A report tomorrow is expected to show that the nation’s consumer prices rose 1.4 percent from a year earlier, the fifth straight gain, according to the median forecast of 19 economists in a Bloomberg survey.

Asian Currencies Fall, Led by Won, on Intervention Risk, Greece

It etreated from a 19-month high, led by South Korea’s won and the Taiwan dollar, on speculation central banks will seek to limit appreciation that may hurt exports.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-used currencies excluding the yen, also declined after a spokesman for Germany’s ruling party said Greece should go to the International Monetary Fund if it needs aid, damping demand for riskier assets. The ringgit weakened on speculation China will tighten lending curbs to stem inflation, tempering the outlook for regional trade.

“If this kind of strength for Asian currencies continues, central banks may need to do something,” said , an economist in Singapore at United Overseas Bank Ltd. “On the European side, we have Germany coming out to say they are not in favor of having the EU help Greece. That would be another risk factor to watch out for that would favor the dollar.”

The won slid 0.5 percent to 1,133.85 per dollar at the 3 p.m. close in Seoul, according to data compiled by Bloomberg. The Taiwan dollar fell 0.3 percent to NT$31.825, and the ringgit declined 0.4 percent to 3.3080. slipped 0.2 percent to 111.90, after yesterday posting its highest close since August 2008.

Greece has announced three sets of austerity measures this year to help allay concern it would struggle to finance a budget deficit that reached 12.7 percent of gross domestic product last year, the European Union’s highest. The risk of default helped shore up support for the in the last two months and sapped demand for emerging-market assets.

Stock Inflows

The Korean currency has strengthened 2.3 percent this month as overseas investors pumped $2.6 billion into the nation’s shares, that helped the benchmark stock index recover from a slide of as much as 7.7 percent this year. Samsung Electronics Co. and Hynix Semiconductor Inc. increased their share of the global semiconductor market last year, narrowing Intel Corp.’s lead, ISuppli Corp. said yesterday.

“A big level for the won is 1,120 through 1,130 against the dollar, and there are some rumors that the Bank of Korea has been in the market,” said , head of foreign- exchange trading at Standard Chartered Plc in Hong Kong. “The fundamentals still point to a lower dollar against Asian currencies.”

China Curbs

The ringgit slipped from near a 19-month high against the dollar on concern spending will cool in China, Malaysia’s biggest export market. China has banned loans to developers hoarding land to wait for higher prices, the China Securities Journal reported today.

“China issues are grabbing the center stage, causing market players to be a bit on the cautious side,” said , a foreign-exchange trader at CIMB Investment Bank Bhd. in Kuala Lumpur.

The ringgit today reached 3.2920 per dollar, just shy of a 19-month high of 3.2910 set on March 12.

Taiwan’s dollar retreated from the strongest level in 18 months on speculation the central bank intervened to limit gains that may derail a recovery in exports. The monetary authority is closely monitoring overseas fund inflows, Governor Perng Fai-nan told lawmakers in Taipei yesterday.

It reached NT$31.667 earlier, the strongest level since September 2008, as global funds purchased NT$12.4 billion ($392.7 million) more local shares than they sold today.

Export Orders

“The central bank doesn’t want big fluctuations in the Taiwan dollar,” said , a fixed-income trader at Taiwan International Securities Corp. in Taipei. “It is allowing appreciation, but only a slow one.”

A Taiwan government report tomorrow may show export orders, an indication of shipments in the next one to three months, increased for a fifth month in February, according to economists surveyed by Bloomberg.

Export orders climbed 31.3 percent last month from a year earlier, after gaining a record 71.8 percent in January, according to the median estimate of economists before a government report tomorrow.

Elsewhere, Thailand’s baht was little changed at 32.31 and the Singapore dollar declined 0.2 percent to S$1.3939 versus the greenback. The Indonesian rupiah fell 0.1 percent to 9,125 and the Philippine peso weakened 0.2 percent to 45.69. China’s yuan were little changed at 6.8259.

OPEC Agrees for Fifth Time to Leave Quotas Unchanged

The Organization of Petroleum Exporting Countries has reaffirmed the quotas at every meeting since they were set in December 2008, even though the group is exceeding that limit by the equivalent of a supertanker of crude a day. OPEC, supplying about 40 percent of the world’s oil, set its official cap at 24.845 million barrels a day.

“OPEC has obviously been quite happy with the current price range,” said Mike Wittner, head of oil research at Societe Generale SA . “Later this year, OPEC will have to think about whether they are comfortable with higher prices.”

OPEC members excluding Iraq pumped 26.8 million barrels a day last month, 1.9 million more than the target, data compiled by Bloomberg show. Shipments will rise again this month, according to tanker-tracker Oil Movements.

Oil prices surged 78 percent last year as OPEC curtailed as much as 3.7 million barrels a day of output and the global economy started to emerge from its worst slump since World War II. Crude futures traded as high as $82.56 a barrel today on the New York Mercantile Exchange, up 3.7 percent this year.

‘Beautiful’

Current prices are “beautiful,” Saudi Arabian Oil Minister Ali al-Naimi told reporters before the start of today’s meeting. At OPEC’s last meeting in December 2009, he said prices between $70 and $80 a barrel are “perfect.” Angolan Oil Minister Jose Maria Botelho de Vasconcelos said yesterday that prices between $80 and $90 a barrel are good and $90 would be too high.

One minister, Algeria’s Chakib Khelil, said the group may have to raise production quotas later this year because of rising prices. There is a “50-50 chance” that output limits will be raised at a subsequent meeting in September, he told reporters yesterday.

“The world is going to need additional OPEC crude output,” said Wittner of Societe Generale. “We expect continued draw downs in inventories and rising prices assuming the global economic recovery continues.”

Too Much Oil

For now, OPEC said its own analysis shows it is pumping more oil than is needed. OPEC estimated in a March 10 report that its current production is 1.5 million barrels a day more than the demand for its crude in the second quarter, after analyzing non-member production and global consumption. In February, members complied with 53 percent of the record 4.2 million barrels a day cuts announced in 2008, OPEC data shows.

Nigeria and Angola are exceeding their quotas and have a standing request with OPEC to enlarge their entitlement. The organization typically avoids tackling such issues until it makes broader changes. The national quotas are not published on the group’s Web site.

OPEC plans to add 12 million barrels to its daily production capacity by 2015, equal to what Saudi Arabia can pump today. The gains would exceed the expected growth in demand, according to the International Energy Agency.

Goldman Sachs, Bank of America Merrill Lynch and Societe Generale SA forecast that demand for oil will recover, requiring new crude supply. Goldman Sachs sees crude reaching $96.50 a barrel within 12 months, while Societe Generale forecasts an average of $104 in 2012 and Merrill says prices may rise as high as $150 in 2014.

Production from the 11 OPEC members bound by quotas rose to 26.811 million barrels a day in February, the organization said in a March 10 report. Shipments will increase 0.9 percent by the end of the month, according to Oil Movements based in Halifax, England.

OPEC’s 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Iraq is exempt from production quotas.

-- With assistance from Mahmoud Kassem, Jonathan Tirone and Ayesha Daya in Vienna, and Alexander Kwiatowski, Rachel Graham and Brian Murphy in London. Editors: Mike Anderson, John Buckley.

Yen, Dollar Fall as Central Bank Outlook Boosts Risk Appetite

The yen and dollar weakened after the Japanese and U.S. central banks pledged to keep interest rates near zero, boosting demand for stocks and higher-yielding currencies.

The Japanese and U.S. currencies fell most against the South African rand and New Zealand dollar after the Bank of Japan doubled a loan program aimed at countering deflation and the Federal Reserve retained a pledge yesterday to keep its target rate “exceptionally low” for an “extended period.” The pound rose to the highest in almost three weeks versus the dollar after a report showed U.K. jobless claims unexpectedly fell in February at the fastest pace since 1997.

“We’re in risk-on mode now,” said Omer Esiner, a senior currency analyst in Washington at Travelex Global Business Payments. “We had another pledge by a central bank to keep the spigots open. Risk assets and higher-yielding currencies are outperforming at the expense of the dollar and the yen.”

The yen fell to 124.49 per euro at 9:11 a.m. in New York from 124.31 yesterday in New York. It slid to 90.48 per dollar from 90.31. The dollar was little changed at $1.3763 per euro compared with $1.3766, after reaching $1.3818, the lowest since Feb. 9. Sterling jumped 0.7 percent to $1.5342, after trading at $1.5382, the strongest since Feb. 25.

The MSCI World Index of equities advanced 0.5 percent, and Japan’s stock benchmarks rose to eight-week highs after the Bank of Japan’s announcement.

BOJ, Fed

The yen fell against the dollar as the Bank of Japan’s credit-easing measures fell short of some analysts’ forecasts. Governor Masaaki Shirakawa and his board doubled the three-month loan facility to 20 trillion yen ($222 billion), the bank said in a statement after its meeting in Tokyo.

The dollar dropped against 12 of the 16 most-traded currencies tracked by Bloomberg a day after the Federal Open Market Committee left the federal funds rate target for overnight loans between banks in a range of zero to 0.25 percent, where it’s been since December 2008.

“The much-anticipated monetary-policy decisions from both the Fed and the BOJ have proved largely uneventful, and are unlikely to derail the recent weakening trend in both the dollar and the yen,” Lee Hardman, a foreign-exchange strategist at Bank of Tokyo Mitsubishi UFJ Ltd. in London, wrote in a note today. “Risk assets should continue to outperform.”

A U.S. report today showed wholesale prices dropped in February for the first time in five months. Prices paid to U.S. factories, farmers and other producers fell 0.6 percent in February, exceeding a 0.2 percent drop in the median forecast of 70 economists surveyed by Bloomberg News.

‘Seems Fantasy’

Harvard University Professor Martin Feldstein, who warned almost two decades ago that the euro would prove an “economic liability,” said Greece’s austerity plan will fail and the country may quit the single currency to fix its fiscal crisis.

“The idea that Greece can go from a 12 percent deficit now to a 3 percent deficit two years from now seems fantasy,” Feldstein, an adviser to U.S. presidents since Ronald Reagan, said in a March 13 interview in Geneva. “The alternatives are to default in some way or to leave, or both.”

The pound rose versus 14 of 16 major currencies tracked by Bloomberg and gained for a second day versus the dollar after minutes released today showed Bank of England policy makers unanimously kept their 200 billion-pound ($304 billion) bond- purchase program on hold for a second month on March 4 as some officials argued that inflation risks have increased.

U.K. Jobless

A separate report showed the number of people receiving unemployment benefits dropped 32,300 from January to 1.59 million, the Office for National Statistics said today in London. The median forecast in a Bloomberg News survey of 29 economists was for an increase of 6,000.

“The pound is recovering, as the labor report is not bad and the BoE was less dovish than some feared,” said David Deddouche, a foreign-exchange strategist for Societe Generale SA in Paris. “But we believe that might be only a temporary rebound. Longer term, the risks are that sovereign-risk concern continues to affect the currency, particularly so ahead of the elections.”

The pound has lost 5 percent against the dollar this year on concern this year’s election won’t result in a government with a majority of seats to push through budget-deficit cuts.

Canada’s currency reached its strongest level since July 2008 against the greenback after crude oil for April delivery climbed 2.4 percent yesterday, the most since Feb. 16. The currency has risen 3.9 percent this year. Oil is one of the nation’s biggest exports.

Canada is on course to be the first Group of Seven nation to erase its budget gap after the global financial crisis with its economy expanding at a 5 percent annualized rate in the fourth quarter. The Canadian dollar reached C$1.0103.

New Zealand’s dollar, also a commodity-linked currency, rose as much as 0.9 percent to touch 71.59 U.S. cents, the highest level since Jan. 26.