Dollar Falls Against Euro, Pound on Signs of Economic Recovery

London - The dollar declined against the euro and the pound as stock markets rose on speculation the global recession is easing, sapping demand for the currency as a haven.

The dollar fell the most against the pound before a report economists said will show consumer credit in the U.S. declined in July by the least in six months. U.S. stock futures jumped. The yen gained against the euro as a report showed Japanese corporate bankruptcies fell for the first time in three months, and on growing speculation the government will boost measures to revive the economy. The pound rose as manufacturing increased three times as much as economists forecast.

“Normal rules apply for the dollar and it’s not surprising to see it being sold, seeing we have big gains in stock markets,” said Jeremy Stretch, a senior currency strategist in London at Rabobank International. “The yen is the anomaly. It’s holding up pretty well.”

The dollar depreciated 0.6 percent to $1.4423 as of 10:02 a.m. in London. The U.S. currency fell 1 percent to $1.6512 against the pound and slipped 0.9 percent to 92.33 yen. The Swedish krona strengthened to 7.0671 against the dollar, from 7.1253 yesterday. Australia’s dollar advanced to 86.19 U.S. cents, from 85.57.

A Federal Reserve report today will probably show U.S. consumer credit fell $4 billion in July, after declining by $10.3 billion a month earlier, according to a Bloomberg survey of economists. Japanese business failures dropped 1 percent from a year earlier, Tokyo Shoko Research Ltd. said in Tokyo today.

Stocks Advance

Europe’s Dow Jones Stoxx 600 Index added 0.5 percent, headed for its fourth day of gains. Futures on the Standard & Poor’s 500 Index rose 1.1 percent, indicating the gauge may advance today following the U.S. Labor Day holiday yesterday.

The yen may extend gains amid speculation Japan’s new government will refrain from acting to weaken it, according to BNP Paribas SA, the largest French lender.

The Democratic Party of Japan, which won a landslide victory in lower house elections on Aug. 30, will officially take over the government for the first time on Sept. 16. Hirohisa Fujii, a lawmaker for the party, said Sept. 3 “intervention shouldn’t be abused.”

“They have suggested they are going to be less interventionist, and that implies there’s room for more yen appreciation,” said Ian Stannard, a senior currency strategist in London at BNP Paribas SA. “They have also reiterated that their focus will be on the domestic side of the economy.”

Pound Jumps

The pound rose against its 16 most-actively traded counterparts after the Office for National Statistics in London said factory output rose 0.9 percent from the previous month, the most in 18 months. Sterling gained 0.3 percent to 87.42 pence per euro.8

The dollar also weakened before speeches by U.S. policy makers including Chicago Fed President Charles Evans and Dallas Fed President Richard Fisherthis week.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the currency against those of six major U.S. trading partners, fell 0.6 percent to 77.489, after reaching 77.398, the lowest level since September 2008.

Fisher said last week the U.S. economy will face “financial headwinds” that will take years to wane, indicating the Fed may maintain its benchmark interest rate as low as zero.

“Overall monetary support from the major economies is supporting risky and high-yield currencies,” Greg Gibbs, a currency strategist in Sydney at Royal Bank of Scotland Group Plc, wrote in a research note today. “The U.S. dollar is the most popular funding currency.”

Evans will speak on “The Great Inflation Debate” in New York and Fisher will speak on “Today’s Economy: New Challenges for Business” in Dallas tomorrow. Atlanta Fed President Dennis Lockhart will speak in Jacksonville, Florida, and Fed Vice Chairman Donald Kohn will speak in Washington on Sept. 10.

“The near-term prospects do not look particularly encouraging for the dollar,”Derek Halpenny, European head of global currency Research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, wrote in an e-mailed report.