Dollar gains for 3rd day as Fed policy shift spurs demand

The Dollar Index rose for a third day, surging after Federal Reserve Chairman Ben S. Bernanke made the case for reducing stimulus as the economy improves, sparking declines in emerging-market assets and commodities.

The U.S. currency is poised for its biggest weekly gain versus the yen in two months before reports next week that economists said will show U.S. home prices and durable-goods orders increased. Norway’s krone extended the largest weekly decline in 4 1/2 years as central bank Governor Oeystein Olsen said policy makers were aware they would trigger a slump by lowering their interest-rate outlook while Sweden’s currency fell against all 16 of its most-traded counterparts.

“It’s basically still dollar strength, post the Federal Open Market Committee’s meeting,” Geoffrey Yu, a senior currency strategist at UBS AG in London, said in a telephone interview. “That’s gradually being absorbed. It’s good to see that it can happen now in a stable manner. Dollar rising with risk on, I think that’s what we all need to see.”

The dollar rose 0.5% to 97.76 yen at 3:02 p.m. New York time, set for a 3.6% gain this week. The U.S. currency added 0.6% to $1.3142 per euro, reaching the strongest level since June 6. The yen gained 0.1% to 128.43 per euro.

Dollar Measure

The Dollar Index, which Intercontinental Exchange Inc. uses to monitor the greenback against the currencies of six U.S. trade partners, increased 0.6% to 82.310. It rose 1% on June 19 when the Federal Open Market Committee left the monthly pace of bond purchases at $85 billion, saying “downside risks to the outlook for the economy and the labor market” have diminished.

Norway’s krone dropped 1% to 6.0552 per dollar, touching the weakest level since July. The currency weakened 3.9% yesterday. The Swedish krona slipped 1.5% to 6.6678 to the greenback.

The rand strengthened for the first time in six days as a rally in metal prices boosted South Africa’s export prospects. The currency appreciated 0.8% to 10.1648 per dollar, paring its first weekly decline in three to 2.2%.

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