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The dollar fell, heading for its biggest weekly loss against the euro in a month, as Asian stocks rose for a third day and on speculation the Federal Reserve will keep interest rates low.

The dollar weakened against 11 of the 16 most-traded currencies as Dallas Fed President Richard Fisher may elaborate on the central bank’s statement this week that the benchmark rate will stay at “exceptionally low levels” for an extended period. Japan’s currency slid for a fourth day against the Australian dollar as commodity prices gained, spurring demand for the South Pacific nation’s assets. New Zealand’s dollar fell after the government said its economy shrank at a faster pace.

“Gains in stocks are pumping capital into markets,” said Masaki Fukui, a senior market economist in Tokyo at Mizuho Corporate Bank Ltd., Japan’s second-largest publicly traded lender by assets. “The recent risk aversion strengthened the dollar as a refuge, but as risk appetite rebounds, higher- yielding currencies seem to be benefiting.”

The dollar declined to $1.4043 per euro as of 12:30 p.m. in Tokyo from $1.3988 yesterday in New York, extending its loss this week to 0.8 percent. The yen fell to 134.66 per euro from 134.22. The U.S. currency traded at 95.89 yen from 95.95 yen.

Australia’s dollar rose 0.5 percent to 80.61 U.S. cents, and climbed 0.4 percent to 77.30 yen. Against the dollar, the pound advanced 0.4 percent to $1.6437.

Indonesia’s rupiah led Asian currencies higher against the greenback, strengthening 1.2 percent to 10,155 per dollar, as regional equities gained. The Nikkei 225 Stock Average rose 0.2 percent, climbing a third day, and the MSCI Asia-Pacific Index of regional shares advanced 0.9 percent.

Commodity Prices Gain

Gold gained for a fourth day, adding 0.3 percent, and crude oil rose 0.3 percent. Gold is Australia’s third-most valuable raw material export, and crude oil is its fourth.

“We had a strong performance in commodity prices,” said Sue Trinh, a senior currency strategist at RBC Capital Markets in Sydney. “Equities also performed very well, which is very supportive of investors’ sentiment generally” to seek higher- yielding currencies.

Benchmark interest rates are 0.1 percent in Japan and as low as zero in the U.S., compared with 3 percent in Australia, making the South Pacific nation’s assets more attractive.

The U.S. central bank held the target rate for overnight lending between banks in a range of zero to 0.25 percent for a fourth consecutive meeting on June 24. The Fed’s Fisher will speak at noon in Dallas.

Summer Bonuses

The yen headed for a weekly decline against the euro as signs the global recession is waning increased speculation that Japanese employees will use their summer bonuses to buy higher- yielding assets abroad.

Finance companies in Japan are looking to raise 520 billion yen ($5.4 billion) for mutual funds focused on foreign assets this week, according to data compiled by Bloomberg.

“Risk-taking appetite among investors is improving,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s third-biggest bank. “The bias is to sell the yen.”

Large companies in Japan will pay this month an average of 754,009 yen in summer bonuses, according to data from the Japan Business Federation. Japanese firms pay bonuses twice a year.

The Ministry of Finance in Tokyo reported yesterday Japanese investors bought 336.1 billion yen more in foreign bonds, stocks and short-term securities than they sold in the week ended June 20.

The yen lost 0.4 percent against the euro this week, extending its loss this quarter to 2.7 percent.

New Zealand’s dollar weakened 0.2 percent to 64.41 U.S. cents after the statistics bureau said gross domestic product declined 1 percent in the first quarter. That exceeded the median estimate for a 0.7 percent contraction in a Bloomberg News survey of 11 economists.

“This is the fifth negative quarter and the second quarter is also on track for a drop so the green shoots in the New Zealand economy are fragile,” said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. “Data like this does support Reserve Bank of New Zealand Governor Alan Bollard’s warning that benchmark rates may still come down and will remain low for some time.”

-Bloomberg-