Dollar UP Crude Oil DOWN

Dollar Rises Against Euro as Stocks Increase, Crude Oil Falls

June 9 (Bloomberg) -- The dollar rose against the euro for the first time in three days as U.S. stock indexes advanced and crude oil prices fell.

The U.S. currency strengthened from a six-week low as the yield advantage of German government debt over comparable- maturity Treasuries narrowed. The dollar fell last week the most against the euro in two months. The yen dropped versus all of the major currencies today after a government report indicated Japan's longest postwar expansion may be over.

``We're seeing a correction to what have been some pretty dramatic advances of the euro,'' said Nick Bennenbroek, head of currency research in New York at Wells Fargo & Co. ``The market is pausing for breath.''

The dollar increased 0.6 to $1.5683 per euro at 10:30 a.m. in New York, from $1.5778 on June 6. It touched $1.5843, the weakest level since April 24. The yen dropped 1.3 percent to 106.26 versus the dollar, from 104.93. Japan's currency decreased 0.7 percent to 166.67 per euro, from 165.54. It touched 167.14, the weakest since Nov. 7.

The British pound appreciated 0.4 percent to 1.9794 against the dollar and 0.6 percent to 1.2562 against the euro after a government report showed producer-price inflation accelerated to the fastest pace in two decades in May. The Bank of England held the target lending rate at 5 percent last week.

Weaker Yen

The yen fell 1.2 percent to 209.28 against the pound and 0.9 percent to 64.79 versus the Brazilian real as Japan's Cabinet Office said the economy may be reaching a ``turning point.'' The government hasn't described the world's second- largest economy in such terms since the most recent recession in 2001. The coincident index, a measure of current economic activity, fell to 101.7 in April, from a revised 102.4 the previous month.

The dollar remained higher versus the euro as an industry report showed an unexpected increased Americans signing contracts to buy existing homes in April. The index of pending home resales rose 6.3 percent to 88.2, the highest level in six months, following a 1 percent drop in March, the National Association of Realtors said today in Washington. The median forecast of 32 economists was for a 0.4 percent drop.

The U.S. currency got a boost against the yen as Lehman Brothers Holdings Inc. said it will raise $6 billion in capital in a public offering. The New York-based firm reported a record $2.8 billion second-quarter loss.

Trichet and Dollar

The dollar dropped 1.4 percent against the euro last week after European Central Bank President Jean-Claude Trichet said in Frankfurt that policy makers may raise borrowing costs in July to contain inflation and the U.S. Labor Department reported that the unemployment rate increased the most in May in more than two decades. It was the euro's biggest weekly gain versus the dollar since late March.

Markets have understood the ECB's position on inflation ``quite well,'' council member Nout Wellink, who also heads the Dutch central bank, was quoted as saying in a June 6 interview with Market News International published today.

The ECB will lift the main refinancing rate twice this year as inflation exceeds the central bank's target, taking it to 4.5 percent by year-end, according to interest-rate futures trading. The implied yield on the December Euribor futures contract rose to 5.47 percent, from 5.39 percent on June 6. European two-year notes had their biggest decline in 4 1/2 months.

European policy makers last week kept their main refinancing rate at a six-year high of 4 percent, unchanged since last June. Trichet will speak at a forum in Paris at 6:30 p.m. local time. Federal Reserve Chairman Ben S. Bernanke, who said on June 3 that he's aware of the impact a falling currency can have on price expectations, will speak at a Boston Fed conference at 8:15 p.m. local time.

The dollar has fallen 11 percent against the euro and 9 percent versus the yen since September, when the Fed began to lower borrowing costs. Futures on the Chicago Board of Trade show a 77 percent chance the Fed will increase its 2 percent target rate by at least a quarter-percentage point by December, compared with 48 percent odds a month ago.

UBS AG, the second-biggest currency trader, cut its one-and three-month dollar forecasts against the euro to $1.60 and $1.53, from $1.50 and $1.47, previously.