The greenback fell versus the Canadian dollar on speculation a 5 percent increase this month in an index tracking the U.S. dollar against the currencies of six major trading partners is too big to sustain. The dollar gained versus the yen as orders for U.S. durable goods unexpectedly rose last month.
The 15-nation euro climbed 0.3 percent to $1.4695 at 10:34 a.m. in New York, from $1.4653 yesterday, when it touched $1.4571, the lowest level since Feb. 14. The dollar rose 0.2 percent to 109.84 yen, from 109.60. The euro increased 0.5 percent to 161.41 yen, from 160.64.
The euro advanced as traders reduced bets that the ECB will cut its 4.25 percent main refinancing rate next year. The implied yield on the Euribor futures contract expiring in September 2009 rose 13 basis points, or 0.13 percentage point, to 4.45 percent, after falling 6 basis points yesterday. The yield averaged 18 basis points above the ECB's benchmark from 1999 to August 2007.
ECB council member Klaus Liebscher said in a speech in Berlin that ``vigilance is more necessary than ever'' regarding inflation. Annual inflation of 4 percent in the countries using the euro is twice the ECB's target of just below 2 percent.
Crude oil for October delivery rose 2.1 percent to $118.76 a barrel on forecasts Tropical Storm Gustav will strengthen as it enters the Gulf of Mexico, home to 26 percent of U.S. production. The euro-dollar exchange rate and oil have had a correlation of 0.9 in the past year, according to Bloomberg calculations. A reading of 1 would mean they moved in lockstep.
The euro has fallen 8 percent from a record high of $1.6038 set on July 15 as the European economy shrank in the second quarter and crude oil declined 20 percent from its all-time high reached last month.
Europe's gross domestic product fell 0.2 percent in the second quarter, the first contraction since the 15-nation common currency was introduced in 1999, the European Union's statistics office said this month.
Federal Reserve policy makers agreed that their next move will be a rate increase, although they didn't indicate the timing, minutes of their Aug. 5 meeting showed yesterday.