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Dollar Ends Three-Day Drop Before Fed Minutes; Kiwi Nears Record

July 9 (Bloomberg) -- The dollar snapped a three-day drop against the yen before the Federal Reserve releases minutes of its June meeting today.

The yen weakened against all but two of its 16 major peers. China’s yuan rose to the strongest level in three months as the two-day Strategic and Economic Dialogue got underway and before a report economists said will show the Asian nation’s trade surplus rose in June. The Swedish krona jumped at least 0.3 percent versus all of its most-traded peers as unemployment climbed less than analysts forecast. New Zealand’s dollar was within 0.5 percent of a record high.

“The move in dollar-yen is driven by cautious dollar recovery across the board,” said Valentin Marinov, head of European Group-of-10 currency strategy at Citigroup Inc. in London. “The dollar was underperforming in recent days and the market is being cautious so could cut some of these shorts.” A short position is a bet an asset will weaken.

The dollar rose 0.1 percent to 101.69 yen at 7:44 a.m. New York time after reaching 101.45 yen, the weakest since July 2. The dollar was little changed at $1.3607 per euro. The Japanese currency was at 138.36 per euro, also little changed.

The Fed will publish today minutes of its June 17-18 meeting, when officials trimmed monthly bond purchases to $35 billion. U.S. central bank Chair Janet Yellen said rates will probably stay low for a “considerable time” in a press conference after the gathering.

Dollar Gauge

A gauge of the dollar halted a two-day drop that came as Minneapolis Fed President Narayana Kocherlakota said yesterday inflation may run below the central bank’s target, while his Richmond counterpart Jeffrey Lacker tempered his previous expectation for more robust growth.

“Sustained acceleration of growth to something over 3 percent in the near future is unlikely,” Lacker said in separate remarks in Charlotte, North Carolina.

Inflation in the world’s biggest economy may run below the Fed’s 2 percent target until 2018, Kocherlakota said in a speech yesterday.

“So far, Fed members this week have sounded more dovish and created some uncertainty in the market heading into the minutes,” said Stan Shamu, a market strategist at IG Ltd. in Melbourne. “The market will be cautious on the dollar before the minutes though we may see a bit of a bounce after the release.”

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major counterparts, was at 1,006.66 after falling 0.1 percent yesterday.

Fed Rates

There’s a more than 90 percent chance U.S. policy makers will keep benchmark borrowing costs between zero and 0.25 percent by December, according to fed funds futures data compiled by Bloomberg.

The dollar weakened 0.4 percent in the past month, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The yen gained 0.5 percent, while the euro lost 0.3 percent. The New Zealand dollar advanced 3.6 percent, the best performance within the gauge.

The yuan rose as U.S. Treasury Secretary Jacob J. Lew urged China to disclose when and why it intervenes in currency markets, according to an interview with CCTV America, part of China Central Television. Lew is in Beijing for the two-day Strategic and Economic Dialogue with Chinese leaders.

China’s exports probably rose 10.4 percent last month from a year earlier, contributing to a trade excess of $37 billion, according to the median estimate of economists surveyed by Bloomberg News before data due tomorrow.

‘Yuan Gains’

“It’s usual for China to allow some yuan gains given the political pressure as talks start,” said Kenix Lai, a Hong Kong-based currency analyst at Bank of East Asia Ltd. “An improving exports outlook and wider trade surplus will also support the yuan to test 6.175 per dollar in the near term.”

The yuan climbed 0.1 percent to 6.1993 per dollar, China Foreign Exchange Trade System prices show. It touched 6.1948, the strongest level since April 9. The People’s Bank of China raised the reference rate by 0.1 percent, the most in a month, to 6.1565. The yuan traded 0.7 percent weaker than the fixing, within the 2 percent limit.

The krona rose the most against the euro since June 13 after Sweden’s Labor Board said the unemployment rate in June climbed to 4.1 percent from 3.9 percent the previous month. That’s less than the 4.3 percent estimate of analysts in a Bloomberg survey.

The Swedish krona appreciated 0.5 percent to 9.2624 per euro and advanced 0.4 percent to 6.8082 per dollar.

New Zealand’s currency added 0.1 percent to 87.99 U.S. cents after touching 88.18, the strongest since Aug. 1, 2011, when it reached a post-float high of 88.43.

Fitch raised New Zealand’s credit outlook to positive from stable yesterday, citing the nation’s improving fiscal situation and supportive economy. The credit assessor affirmed the country’s AA rating, two levels below the top score.

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