Bloomberg – The dollar fell the most in more than a month against the euro as signs manufacturing is expanding in the U.S. and China damped the appeal of safer assets.

The greenback weakened versus all of its most-traded peers after a U.S. factory gauge indicated the fastest growth in six months. Purchasing-manager indexes this week for China and India also showed manufacturing gains. The euro snapped a seven-day losing streak versus the yen, its longest since December 2010, after German unemployment fell more than forecast. Australia’s and New Zealand’s dollars rose to the strongest since November.

“The data that came out today was pretty positive,” said Mary Nicola, a currency strategist at BNP Paribas SA in New York. “It helped boost risk sentiment.”

The dollar fell 1.1 percent to $1.3073 per euro at 2:09 p.m. in New York in its biggest intraday decline since Nov. 30. The U.S. currency declined 0.3 percent to 76.66 yen. The euro gained 0.7 percent to 100.20 yen after falling to 98.66 yesterday, the weakest level since December 2000.

The greenback remained weaker versus its major counterparts after minutes of the Federal Reserve’s last policy meeting, released today, showed central-bank officials will for the first time make public their forecasts for the benchmark interest rate at their Jan. 24-25 meeting.

The Standard & Poor’s 500 Index of stocks climbed 1.7 percent and the Thomson Reuters/Jefferies CRB Index of raw materials added 2.6 percent.

The Institute for Supply Management’s factory index rose to 53.9 in December from 52.7 a month earlier, the Tempe, Arizona- based group’s data showed today. Fifty is the dividing line between growth and contraction, and economists surveyed by Bloomberg News projected the gauge would climb to 53.5.

‘More Risk-On’

“You get a good number like this and it continues” the trend, said Fabian Eliasson, head of U.S. currency sales at Mizuho Financial Group Inc. in New York. “The dollar is falling off, and it’s a little bit more risk-on.”

Brazil’s real gained the most against the dollar among its 16 major counterparts tracked by Bloomberg, adding 2.2 percent to 1.8306 per greenback. Mexico’s peso appreciated 1.7 percent to 13.6822 to the dollar.

China’s purchasing managers’ index for manufacturing increased to 50.3 last month from 49 in November, the logistics federation said Jan. 1. The reading exceeded all forecasts in a Bloomberg survey. India’s PMI for manufacturing rose to the highest in six months, HSBC Holdings Plc and Markit Economics said yesterday.

Dollar Index

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, dropped 0.9 percent to 79.559.

The dollar has fallen 0.8 percent in the past week, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The greenback gained 1.1 percent last year, snapping two years of losses. The euro was the worst performer in 2011, sliding 2 percent.

U.S. employers added 150,000 jobs in December, compared with an increase of 120,000 in November, according to the median estimate of economists in a Bloomberg News survey. The Labor Department will release the report Jan. 6.

The euro extended gains after the Nuremberg-based Federal Labor Agency said German unemployment fell in December more than economists forecast. The number of people out of work slid a seasonally adjusted 22,000 to 2.89 million, the agency said. Economists forecast a drop of 10,000, a Bloomberg survey showed.

Basis Swaps

The cost for European banks to borrow in dollars tumbled to the lowest level in two months, according to a money-markets indicator. The three-month cross-currency basis swap, the rate banks pay to convert euro interest payments into dollars, touched 1.04 percentage points below the euro interbank offered rate, the least expensive since Nov. 9 on an intraday basis, according to data compiled by Bloomberg. It closed yesterday at 1.14 percentage points below Euribor.

Canada’s dollar may appreciate to a two-month high against its U.S. counterpart if it closes stronger than its 100-day moving average of C$1.0143, according to MacNeil Curry, head of foreign-exchange and interest-rates technical strategy at Bank of America Corp in New York. Such a close may spur the currency to parity, a level it hasn’t been at since Nov. 1. The currency gained 0.8 percent today to C$1.0107.

The Australian and New Zealand currencies climbed as equities rallied.

Australia’s dollar strengthened 1.3 percent to $1.0363 after climbing to as high as $1.0386, the strongest level since Nov. 9. The New Zealand dollar advanced 1.4 percent to 78.94 U.S. cents. It reached 79.06 cents, the most since Nov. 14.

European Crisis

Gains in the euro were tempered by concern the European debt crisis will hamper economic growth in the region.

European services and manufacturing output shrank for a fourth month in December, according to a Bloomberg survey before a report tomorrow from London-based Markit Economics. The data will confirm a composite index based on a survey of purchasing managers rose to 47.9 in December from 47 in November, below the 50 that indicates contraction, economists predict.

Futures traders last week boosted bets the euro will weaken. The number of wagers made by hedge funds and other large speculators betting on a drop in the 17-nation currency increased to a record 127,879 contracts more than those anticipating a gain, according to the Washington-based Commodity Futures Trading Commission.

–With assistance from Kristine Aquino in Singapore. Editors: Greg Storey, Dave Liedtka

To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Keith Jenkins in London at kjenkins3@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

WSJ —The euro extended modest gains and the dollar eased further Thursday on better-than-expected U.S. economic data and the German parliament’s approval of financial aid for the euro zone.

U.S. jobless claims dropped by 37,000 to 391,000 last week, the lowest since April 2, the Labor Department said. Economists had expected new claims to fall to 417,000 on a seasonally adjusted basis.

In Europe, Germany’s Bundestag voted in favor of legislation to increase the size and flexibility of the European Financial Stability Facility, the euro zone’s bailout fund. Chancellor Angela Merkel’s ruling center-right coalition reportedly provided 315 out of the 523 yes votes, indicating that she didn’t have to rely on the backing of opposition parties to win passage of the measures.

In midday trade, the single currency was at $1.3620 compared with $1.3544 late Wednesday. The dollar was at ¥76.72 compared with ¥76.61, while the euro was at ¥104.47 compared with ¥103.74. The pound bought $1.5665 from $1.5576, while the dollar fetched 0.8956 Swiss franc from 0.9001 franc.

The dollar index, which measures the U.S. unit against a basket of six major currencies, slipped to 77.69 from 77.995 late Wednesday.

“Better-than-expected U.S. economic data and the smooth passage of the amendments to the European Financial Stability Facility in Germany helped to boost risk appetite across the financial markets,” said Kathy Lien, director of currency research for GFT, in her daily note.

Ms. Merkel had struggled in recent weeks to limit defections from the coalition made up of her Christian Democratic Union; its sister party, the Christian Social Union; and the Free Democrats, the junior coalition partner.

“Europe and the euro does not need a weakened German chancellor,” said Stephen Pope, managing director of Spotlight Ideas.

Failure to maintain an “absolute majority” through her own coalition would have left Ms. Merkel vulnerable to calls for early elections, analysts said.

More importantly, strong support from within her coalition signals potential support for future bailouts, Ms. Lien said.

Bloomberg – The dollar rose toward a six-month high against the yen as Federal Reserve Chairman Ben S. Bernanke said yesterday inflation must be watched “extremely closely,” spurring bets interest rates may be raised sooner than forecast.

Australia’s dollar dropped from almost a record after the central bank left interest rates on hold for a fourth meeting. Sterling was the biggest winner versus the dollar among the most-traded currencies as the U.K.’s service industries accelerated at the fastest pace in more than a year last month.

“Bernanke sent a signal that the Fed is not losing sight of the second part of its dual mandate, which is price stability,” said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. “There’s been a lot of focus on the full-employment side of the mandate. This shifts the focus a little bit further towards inflation, and that’s helpful for the dollar.”

The yen declined 0.7 percent to 84.63 versus the dollar at 1:01 p.m. in New York, from 84.06 yesterday. It touched 84.73 on April 1, the highest level since Sept. 24. The dollar traded at $1.4224 per euro, compared with $1.4221. The euro gained 0.7 percent to 120.37 yen, from 119.54.

The pound advanced as much as 1 percent to $1.6295 in the biggest intraday rally since Jan. 31 on evidence the U.K.’s economy is recovering.

Markit Economics Ltd. and the Chartered Institute of Purchasing and Supply said a gauge of U.K. services based on a survey of companies rose to 57.1, the highest level in 13 months and above the median forecast of 52.6.

Australian Policy

The Aussie weakened 0.2 percent to $1.0344 after reaching a record high of $1.0417 yesterday. Reserve Bank of Australia Governor Glenn Stevens held the overnight cash target rate at 4.75 percent for a fourth straight meeting as floods disrupted coal mining in the nation’s northeast and a rising currency tempered inflation.

The greenback strengthened versus the yen after Bernanke said yesterday in Stone Mountain, Georgia, that policy makers will “have to respond” if estimates that faster inflation will be transitory prove incorrect.

The comments echoed his March 1 statement to lawmakers that Fed officials were “prepared to respond as necessary” to inflationary pressure. The policy-setting Federal Open Market Committee said following its March 15 meeting that it “will pay close attention” to the evolution of inflation and inflation expectations. The central bank will release minutes of the meeting today.

Fed Target Rate

The Fed has kept its target rate for overnight lending between banks at zero to 0.25 percent since December 2008 and reiterated last month that it would remain there for an “extended period.”

The dollar pared its gains earlier today as the U.S. Institute for Supply Management’s index of non-manufacturing businesses dropped to 57.3 in March. The median forecast of 69 economists in a Bloomberg News survey was for a decrease to 59.5. A reading above 50 indicates growth.

“It doesn’t indicate weaker inflation pressures, but it shows the economy cooling somewhat at the edges,” Andrew Wilkinson, senior market analyst at Interactive Brokers Group LLC in Greenwich, Connecticut.

The yen weakened against the dollar as people familiar with the matter said the Bank of Japan is considering offering temporary loans to banks to aid companies with cash-flow shortages following the March 11 earthquake.

BOJ Proposal

The plan may be presented to the BOJ board as early as this month, the people said, speaking on condition of anonymity because the discussions weren’t public.

The BOJ will keep its target rate at zero to 0.1 percent on April 7, according to all of the 14 economists in a Bloomberg News survey. The European Central Bank will increase its main refinancing rate by a quarter-percentage point from a record low 1 percent at its meeting that day, according to all of the 57 economists in a separate Bloomberg News survey.

“We’re looking at various stages of a more hawkish ECB and Fed,” said John McCarthy, director of currency trading at ING Groep NV in New York. “That corresponds to both a real interest-rate differential between Europe, the U.S. and Japan, and that has underpinned dollar-yen and euro-yen.”

The euro fell earlier against the dollar after Moody’s Investors Service lowered Portugal’s long-term credit rating by one step to Baa1.

Canada’s Yen Selling

Canada said it sold $124 million worth of yen, or almost half of its $252 million of yen reserves, in the March 18 joint intervention by the Group of Seven countries, the nation’s finance department said it its monthly official international reserve report.

G-7 countries jointly intervened last month in the foreign- exchange market for the first time in more than a decade after Japan’s currency soared to its highest level since World War II, threatening the nation’s recovery from the March 11 earthquake and tsunami. The total size of the G-7 intervention has been estimated at about $25 billion.

The yen has weakened 4 percent in the past month, the biggest decline among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Currency Indexes.

To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

Bloomberg – The yen dropped the most in six months against the dollar as Group of Seven nations said they will jointly intervene in foreign-exchange markets for the first time in more than a decade.

Japan’s currency fell against all of its 16 major counterparts as Finance Minister Yoshihiko Noda said the intervention started at 9 a.m. Tokyo time and after officials from the most industrialized nations discussed the impact of the March 11 earthquake in Japan. Each country will intervene when their markets open, Noda said. The Australian and New Zealand dollars rose, paring weekly losses, as a rally in Japanese shares boosted demand for higher-yielding assets.

The G-7 statement “met everyone’s expectations, it was what people wanted,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “The earthquake is considered one of the biggest in a few centuries, and so other nations must help Japan. The yen should fall toward 83 as nations are unified to stop its advance.”

The yen plunged 2.8 percent to 81.14 per dollar as of 10:06 a.m. in Tokyo from 78.89 in New York yesterday, when it touched 76.25, a post-World-War-II high. The currency dropped to 113.70 per euro from 110.61. The dollar was at $1.4009 per euro from $1.4021.

“In response to recent movements in the exchange rate of the yen associated with the tragic events in Japan, and at the request of the Japanese authorities, the authorities of the U.S., the U.K., Canada, and the European Central Bank will join with Japan, on March 18, 2011, in concerted intervention in exchange markets,” the G-7 said today in a statement.

Coordinate Intervention

The combined sales are an attempt to limit the damage a strong Japanese currency will have on the nation’s economy in the aftermath of the magnitude 9.0 earthquake.

“You couldn’t expect anything stronger than what the statement contains,” said Koji Fukaya, chief currency strategist at Credit Suisse Group AG in Tokyo. “Investors will be forced to unwind long positions on the yen.” A long position is a bet that an asset will rise.

Japan unilaterally sold more than 2 trillion yen ($26 billion) in foreign-exchange markets in September to stem gains, its first intervention since 2004.

The Bank of Japan today added 3 trillion yen to the financial system, bringing its emergency fund injections this week to 37 trillion yen.

Some Cooling Achieved

Water cannons may have had some success in cooling one reactor at Japan’s Fukushima Dai-Ichi nuclear plant, crippled by the quake and ensuing tsunami, while the United Nations nuclear agency said the situation remained “very serious.”

Cannons and helicopters were used to douse the plant yesterday as workers tried to stem radioactive pollution from the worst nuclear accident since Chernobyl. Some water may have reached the No. 3 reactor, a Tokyo Electric Power Co. official said.

The Nikkei 225 Stock Average rallied as much as 3.2 percent, and the broader Topix index advanced as much as 2.8 percent.

The Australian dollar rallied to 98.96 U.S. cents from 98.03 cents in New York, set for a 2.4 percent slide this week. The New Zealand dollar rose 1 percent to 72.52 U.S. cents, having fallen 2.4 percent this week. The kiwi gained to 58.80 yen from 56.64 yen.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

NEW YORK (CNNMoney) – China is allowing U.S. currency traders to have a crack at its tightly controlled currency, the yuan, but analysts say the move will have more impact on international politics than markets.

“It’s a peace offering to the rest of the world,” said Dean Popplewell, chief currency strategist at the Toronto office of the Oanda Corp., a currency trading services company.

The announcement comes just one week before Chinese President Hu Jintao is expected to visit Washington on Jan. 19, and China’s currency controls will likely be high on the agenda.

“Most individuals from the dealer side see it more as a political move ahead of Washington next week, some type of appeasement to take the spotlight off the yuan itself,” Popplewell said.

While the yuan is already traded by U.S.-based traders through Hong Kong markets, this is the first time the government-controlled Bank of China is allowing U.S. customers to buy yuan directly. Traders will be able to withdraw up to $4,000 worth of yuan per day from Bank of China’s New York City branch, at a maximum of $20,000 per year.

But the move is not expected to have much of an effect on the yuan’s value.

“It’s a sort of a first step but I would imagine it’s a political move more than anything,” said David Morrison, market strategist at the currency trading company GFT in London.

“Every time the U.S. government has gotten close to calling the Chinese a currency manipulator, China has done something to put the U.S. on a back foot. This is really a very, very minor concession to dampen down the anti-Chinese rhetoric about manipulating their currency.”

Treasury Secretary Timothy Geithner on Wednesday said China must do more to address its undervalued currency. The Chinese government has been accused of artificially pegging its currency to the dollar, rather than allowing it to trade freely, in order to keep its exports cheap.

“We believe it is in China’s interest to allow the currency to appreciate more rapidly in response to market forces,” said Geithner.

Morrison said the yuan is worth more on Wednesday, with the U.S. dollar worth 6.6128 yuan, compared to the close on Tuesday, when the dollar was worth 6.62 yuan. If the yuan’s value continues to rise, then traders could benefit.

“We fully expect continued [yuan] appreciation, and note that the yuan has been very strong this week after a weak start to the year,” wrote Win Thin, global head of emerging markets strategy for Brown Brothers Harriman, in a note to investors. “The yuan often sees outsize gains just before major summits, and so gains are likely to continue over the next week.”

But analysts said it’s unlikely that U.S. traders will be able to impact the value of the Chinese currency if Beijing is still holding the reins.

“The Chinese have a very, very strict control over it,” said Morrison. “I don’t think that being able to get one’s hands on the yuan in cash terms is going to affect the trading of it.”

Reuters – The euro rallied on Tuesday but struggled to hold the session peaks given nervousness over a heavy schedule of debt issuance by southern European countries this week.

The euro had gone close to $1.3000 after euro zone sources said finance ministers are likely to consider next week the option of raising the effective lending capacity of the euro zone rescue fund as part of efforts to calm sovereign debt markets. For details see [ID:nLDE70A1RM].

Market talk of increased Portuguese bond buying by the European Central Bank added to the euro’s luster in the New York session.

But a critical test for the euro will come on Wednesday when Portugal is scheduled to sell up to 1.25 billion euros of bonds in an auction that will signal whether the indebted country will be able to afford to raise funds in the debt market or be forced to take a bailout.

“Given that there are a lot of issues still unsettled with the European debt crisis, which is likely to continue for many months, there’s always going to be pressure on the euro,” said Ihab Salib, senior portfolio manager and head of international fixed-income at Federated Investors in Pittsburgh.

Federated Investors manages about $341.3 billion in assets. Salib oversees more than $3 billion.

The euro last traded up 0.1 percent at $1.2961 EUR=EBS, having risen as high as $1.2994 on trading platform EBS.

It gave up some gains after a well received U.S. Treasury Department auction of three-year notes US3YT=RR. [ID:nTAR000102]

Euro resistance is at its 200-day moving average of $1.3072 while support is around $1.2794, the 61.8 percent Fibonacci retracement of a June-to-November rally.

Traders still expect the euro to retest its four-month low around $1.2875 set on Monday, with a break likely opening the door to a drop towards $1.2645 and $1.2590 in the coming weeks.

The euro earlier also found support after Japan said it will purchase euro zone bonds to bolster confidence in the European Financial Stability Facility but in a volatile session momentum faded after Tokyo said it would use existing euro reserves to pay for the debt. [ID:nLDE70A06M]

Tokyo’s pledge came after China assured Spain it would invest in the indebted euro zone state’s bonds — an assurance whose impact also proved fleeting.

NEW YORK (Dow Jones)–The dollar fell modestly after disappointing U.S. payrolls data in volatile trading Friday morning as investors struggled to digest what the indicator means long term for the greenback.

The dollar initially ticked down against the euro and yen in the reaction to the report, before recouping some losses because even though the figures disappointed expectations, market participants overall interpreted the jobs picture as improving.

“The dollar is slightly weaker but that’s because the dollar has been so strong this week and ADP data led to elevated expectations,” said Jens Nordvig, head of G10 foreign exchange strategy at Nomura Securities in New York. “But the dollar is overall still performing well.”

The report from payroll processor ADP on Wednesday showed a job expansion of 297,000 in December. That nearly tripled economists’ forecast and boosted optimism about Friday’s nonfarm payrolls report.

Investors continued to be rattled by worries over euro-zone debt ahead, insulating the dollar from heavy losses, especially in light of a drop in the U.S. unemployment rate to 9.4% and a positive revision to last month’s jobs number, said several analysts. Any pullback in the dollar Friday is likely to lack conviction, with around EUR24 billion of euro-zone government bond supply due next week.

“Are you really going to buy the euro at this stage?” asked Brian Kim, currency strategist at UBS in Stamford, Conn. He noted continuing worries over euro-zone sovereign debt.

The dollar’s gains on the day against the yen evaporated after the tepid jobs data, with the greenback reversing itself and declining against the Japanese currency. Following this weak data, market participants are likely abandoning any discussed possibility that the Federal Reserve could decide to end its $600 billion asset-purchase program prematurely, said Steven Englander, head of G10 strategy at Citigroup in New York.

“The markets now think it’s likely that the Fed will go all the way on [quantitative easing],” he said.

Federal Reserve Chairman Ben Bernanke testified Friday morning to Senate Budget Committee on monetary and fiscal policy, but his remarks had little impact on currency markets.

In answering a U.S. senator’s question on whether investor worry will eventually boil over when it comes to the U.S. fiscal position, Bernanke said the dollar is “indicator of confidence” in the U.S.

Late Friday morning, the euro was at $1.2968 from $1.3009 late Thursday, according to EBS via CQG. The dollar was at Y82.99 from Y83.36.

-By Andrew J. Johnson, Dow Jones Newswires; 212-416-3092; andrewj.johnson@dowjones.com

(Bradley Davis contributed to this article.)

Bloomberg – Colombia’s peso dropped to a two- week low as concern that Europe’s sovereign-debt crisis will spread from Greece and Ireland to other euro-area nations led investors to seek refuge in the U.S. dollar.

The peso fell as much as 1 percent after Ireland’s credit rating was cut five levels by Moody’s Investors Service on concern the nation will struggle to contain bank losses and cut debt. Ratings of Europe’s deficit-ridden peripheral nations are under pressure with Moody’s saying this week it may cut Spain and Greece, which already has a junk grade.

“Fear of contagion is driving investors to liquidate positions and seek liquidity in money markets and the dollar,” said Camilo Forero, an investment manager at Bogota-based brokerage Afin SA.

Colombia’s currency slipped 0.2 percent to 1,919 per U.S. dollar at 1:44 p.m. New York time, from 1,915.60 yesterday. Earlier today it plunged to 1,934.25, its lowest level since Dec. 1. The peso has plunged 6.3 percent in the past three months, the worst performance among 25 emerging-market currencies tracked by Bloomberg.

The central bank said in a statement today it adopted measures to simplify currency operations in order to “reduce red tape and facilitate procedures.”

The move shouldn’t impact the spot market, said Camilo Perez, head analyst at Banco de Bogota SA and Daniel Lozano, an analyst at brokerage Serfinco SA.

Peso Forecast

Banco de la Republica today left its overnight lending rate unchanged at a record low 3 percent, matching the forecasts of all 28 economists surveyed by Bloomberg.

Colombia’s peso will strengthen to 1,750 per dollar by the end of next year as increased oil and mining production boosts dollar inflows, HSBC Holdings Plc said. HSBC revised its 2011 year-end peso estimate from 2,000 previously, currency strategist Marjorie Hernandez said in a report today.

The yield on benchmark 11 percent bonds due 2020 fell five basis points, or 0.05 percentage point, to 7.73 percent, according to Colombia’s stock exchange. The bond’s price rose for the first day in eight, increasing 0.381 centavo to 121.513 centavos per peso.

The yield yesterday rose to a six-month high of 7.78 percent amid speculation heavier-than-normal rainfall will stoke inflation.

Quickening Inflation

Rains have damaged close to 1 million hectares (2.5 million acres) of crops, according to the government. Consumer prices rose 0.19 percent last month, almost double the median forecast for a 0.10 percent increase among 20 economists surveyed by Bloomberg. Higher inflation damps returns on fixed-rate bonds, prompting investors to demand a higher yield.

Central bank chief Jose Dario Uribe said after today’s monetary policy meeting that the acceleration in inflation, “explained principally by the increase in food prices as a consequence of the climate phenomena, will be transitory in character.”

Inflation will come in under 3 percent next year, he said.

Annual inflation quickened to 2.59 percent last month, within the central bank’s target for this and next year of between 2 percent and 4 percent.

To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

Bloomberg – Russia has started adding the Canadian dollar to its international reserves and may increase those holdings in coming months, said Alexei Ulyukayev, first deputy chairman of Russia’s central bank.

“We have recently begun investing in assets denominated in the Canadian dollar,” Ulyukayev, 54, said in an interview yesterday in Moscow. “So far, the amounts are very small, but there’s perhaps potential for increasing our holdings.”

Russia aims to diversify its reserves, the world’s third biggest, and promote the use of regional currencies in international trade and finance to reduce risks posed by the dominance of the U.S. dollar. The central bank has said it also plans to increase gold holdings and may consider including other currencies, including the Australian dollar.

The reserves comprise 47 percent U.S. dollars, 41 percent euros, 10 percent British pounds, 2 percent Japanese yen and a small amount in Swiss francs. The central bank has reduced the U.S. currency from 50 percent of the total in 2006, when euros accounted for 40 percent, with yen and pounds accounting for the rest. Russia’s reserves totaled $495.7 billion as of Nov. 12.

The Canadian dollar’s share of Russia’s reserves, which rank behind only China and Japan, is so small it hasn’t yet affected currency allocations, Ulyukayev said.

“Within several months we may be able to speak about more substantial volumes and any changes in the structure” of the reserves, he said.

Canada’s dollar, dubbed the loonie after the aquatic bird on the country’s dollar coin, has gained 4.2 percent against the greenback this year on increasing demand for higher-yielding assets and raw materials. Commodities generate about half of the country’s export revenue.

‘Theoretical Sense’

Bank Rossii is considering including the Australian dollar “in the list of currencies allowed for reserve allocation,” Ulyukayev said. Australia’s currency, also linked to commodities, has risen 9.6 percent against the dollar this year.

“We are considering several other currencies, but we are looking at them more in a theoretical sense than a practical one,” Ulyukayev said.

There is growing support for a new global currency system that is less reliant on the dollar as a reserve currency, South African Finance Minister Pravin Gordhan told reporters in Pretoria on Nov. 15. While the dollar’s position “‘has been shaking,” there is no other currency that would serve as an alternative, Japan’s Prime Minister Naoto Kan said Nov. 19.

The greenback will remain the “leading” global reserve currency even as new rivals appear, Ulyukayev said.

Dollar Leads

“There is competition and it looks like it will intensify among currencies that play the role of global and regional reserve currencies,” Ulyukayev said. “I think the dollar will be leading in this competition,” given the U.S.’s share of the global economy and its highly developed financial markets.

Russian President Dmitry Medvedev renewed his drive to reduce the dollar’s dominance and transform Moscow into a global financial hub, promoting the ruble as a reserve currency in his speech at the St. Petersburg Economic Forum in June.

The ruble has become a “regional reserve currency for the countries of the former Soviet Union” and nations with “a traditionally large share of trade with Russia,” Ulyukayev said. “This is seen in increasing volumes of settlements in rubles” and ruble-denominated Eurobond issues by borrowers outside Russia, he said.

China’s ‘Discrepancy’

China, the world’s fastest-growing major economy, started allowing the yuan to trade against the ruble on Nov. 22 to help internationalize the Chinese currency. Russian Prime Minister Vladimir Putin said this week that the yuan would start trading on Russian exchanges next month as the two countries use local currencies in bilateral trade.

The Chinese yuan will become a global reserve currency once it becomes fully convertible, Ulyukayev said. The yuan is allowed to trade 0.5 percent on either side of a daily fixing rate to the dollar as set by the central bank.

“There is a discrepancy between China’s share of global trade, GDP and the lack of convertibility” of its currency, Ulyukayev said. “If this discrepancy will be overcome quickly, the yuan will enter their ranks.”

Brazil’s real is unlikely to become a global reserve currency in the “near future,” he said.

–With assistance from Artyom Danielyan, Anna Ulaeva and Emma O’Brien in Moscow. Editors: Willy Morris

To contact the reporter on this story: Maria Levitov in Moscow at mlevitov@bloomberg.net

To contact the editor responsible for this story: Willy Morris at wmorris@bloomberg.net

Blomberg – The dollar advanced from near a nine- month low versus the euro as a government report showed U.S. employers added more jobs than forecast last month, increasing payrolls for the first time since May.

The common currency retreated against 15 of its 16 major counterparts after data showing European retail sales unexpectedly fell and Spain’s economy stagnated revived concern that so-called peripheral countries will struggle to plug budget gaps. Federal Reserve Chairman Ben S. Bernanke said an acceleration in U.S. economic growth would support the value of the U.S. dollar compared with other currencies.

“We’re back to where good news from the U.S. is actually good for the dollar,” said Win Thin, a senior currency strategist at Brown Brothers Harriman & Co. in New York. “If growth starts to pick up in the U.S., then inflation fears come back up and that becomes a little more dollar-supportive.”

The dollar advanced 1.3 percent to $1.4032 per euro at 5 p.m. in New York, from $1.4207 yesterday. It touched $1.4282 yesterday, the weakest level since Jan. 20, and lost 0.6 percent for the past five days. The greenback gained 0.6 percent to 81.26 yen, from 80.75 yen yesterday, and rose for the first week since the five days ended Sept. 17, gaining 1.1 percent. The euro declined 0.6 percent to 114.04 yen, from 114.71.

Payrolls climbed by 151,000 jobs, beating the 60,000- position median forecast of economists surveyed by Bloomberg News, after a revised 41,000 drop in September, Labor Department data showed in Washington. Private payrolls that exclude government agencies also gained more than forecast, swelling by 159,000 positions, while the jobless rate held at 9.6 percent.

Fed Purchases

The dollar fell versus the euro earlier this week after the Fed said Nov. 3 it will buy $600 billion in Treasuries through June in a strategy called quantitative easing to spur employment and avert deflation.

The greenback, which has dropped 13 percent versus the yen this year amid speculation the U.S. would debase its currency with debt purchases, could be nearing a bottom, according to Kathy Lien, director of currency research at online currency trader GFT Forex in New York.

“A true bottom in the U.S. dollar will not occur until we see a consistent improvement in non-farm payrolls that encourages the Fed to pare back their quantitative-easing program,” Lien wrote in a note to clients.

Bernanke said the Fed’s asset-purchase plan is targeted at bringing about a more rapid U.S. recovery.

“The best fundamentals for the dollar will come when the economy is growing strongly,” the central-bank chief said today in response to questions from college students in Jacksonville, Florida. “A strong U.S. economy is critical not just for Americans but for a global recovery,” he added.

Bets Against Euro

The euro’s one-month 25-delta risk-reversal rate against the dollar — the premium of put options over calls — dropped below minus 1 percent for the first time since Sept. 14, falling as much as 0.24 percentage point and signaling investors are betting on a weaker common currency. A delta is the change in the value of an option for each dollar change in the market price of an underlying asset.

Peru’s sol had its biggest weekly gain in three months as the Fed’s bond-purchase plan lifted commodity prices and fueled demand for higher-yielding, emerging-market currencies. The sol gained 0.2 percent to 2.7925 per dollar, from 2.7985 on Oct. 29.

More Explaining Needed

China said the U.S. central bank needs to further explain its decision to pump more money into the world’s biggest economy or risk undermining the global recovery.

“Many countries are worried about the impact of the policy on their economies,” Vice Foreign Minister Cui Tiankai said at a press briefing in Beijing today.

Cui’s remarks echoed concerns raised across Asia as countries brace themselves for stronger currencies and possible asset-price inflation as the greenback weakens.

The Canadian dollar was worth more than its U.S. counterpart for the first time since Oct. 14 after the U.S. jobs data and a report showing Canada’s employers added 3,000 positions last month. The currency, nicknamed the loonie, traded at C$1.0004 per greenback after strengthening to as much as 99.92 Canadian cents, from C$1.0022 yesterday.

The greenback fell yesterday as the European Central Bank signaled it will likely stick with its stimulus-exit strategy even as the Fed buys Treasuries to spur the U.S. economy.

Weak European Data

The European shared currency slid today after weaker-than- expected economic data as austerity measures by some euro-region countries to reduce budget deficits undermined their recovery.

The extra yield investors demand to hold Spanish 10-year bonds instead of similar-maturity German securities touched 200 basis points, a three-month high, leading the spread-widening among bonds of Europe’s peripheral nations.

“Those spreads have been widening for a couple weeks now, but now that we’re past quantitative easing the market has been more focused on that,” said Amelia Bourdeau, a currency strategist in Stamford, Connecticut, at UBS AG.

Retail sales in the euro region fell 0.2 percent in September from the previous month, when they also slipped 0.2 percent, the European Union’s statistics office said today. Spain’s gross domestic product stalled in the third quarter, the Bank of Spain estimated.

To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net; Catarina Saraiva in New York at asaraiva5@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net