Dollar declines on Obama budget optimism

The dollar fell against all 16 of its most-traded counterparts as speculation U.S. lawmakers will reach agreement on the nation’s budget and avert the so-called fiscal cliff damped demand for safety.

The Dollar Index fell from almost a 10-week high after President Barack Obama said he was “confident” that an agreement would be reached to avert the triggering of automatic spending cuts and tax increases at year-end that may push the economy into recession. The Canadian and Australian dollars extended gains against the greenback as the International Monetary Fund said it would classify the currencies as official reserve assets.

“It’s pretty much just market optimism mainly regarding the fiscal-cliff issue,” Sireen Harajli, a foreign-exchange strategist in New York at Credit Agricole SA, said in a telephone interview. “It seems that both parties are showing more willingness to negotiate and find a middle ground. There’s been an improvement in risk aversion, which hurts the dollar.”

The dollar weakened 0.4 percent to $1.2796 per euro as of 10:36 a.m. New York time, after slipping 0.2 percent last week. The yen strengthened 0.1 percent to 81.23 versus the U.S. currency after falling as much as 0.3 percent to 81.59, the weakest level since April 25. The Japanese currency fell 0.3 percent to 103.94 per euro after earlier depreciating to 104.11, the lowest since Oct. 25.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, dropped 0.4 percent to 80.923. It reached 81.455 on Nov. 16, the highest since Sept. 5.

‘Softer Tone’

“It’s a slightly softer tone for the dollar to start the week,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. Optimism that U.S. leaders would reach a budget agreement “has provided slight relief for risk.”

The IMF asked member countries to report holdings of the Canadian and Australian dollars along with those of the U.S. dollar, euro, yen, sterling and Swiss franc in their foreign- exchange reserves. The move was first reported by

Canada’s dollar climbed 0.5 percent to 99.67 cents per U.S. dollar. The so-called Aussie added 0.7 percent to $1.0408.

Brazil’s real gained versus most of its major peers after analysts lowered their forecasts for 2013 economic growth, bolstering bets that the country’s central bank will keep borrowing costs low.

The currency appreciated 0.7 percent to 2.0704 per dollar after closing at a five-month low Nov. 16. The real rose as much as 0.7 percent, its biggest increase since Aug. 31.

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