Aug. 21 (Bloomberg) -- The dollar and yen declined against most major currencies after Federal Reserve Chairman Ben. S. Bernanke said the global economy is emerging from recession and U.S. existing home sales rose, reducing demand for safety.

The euro advanced for a fourth consecutive day against the dollar, the longest streak of gains since June, after German services and French manufacturing unexpectedly expanded in August. The Canadian dollar and the Norwegian krone gained as crude oil, the largest export of each nation, rose to a year high of more than $74 a barrel.

“We got confirmation every day in and out, the worst is over,” said Daniel Moreno, a portfolio manager in Kolding, Denmark, at Global Evolution, which specializes in trading emerging-market assets. “The good-data-bad-for-dollar correlation hasn’t broken. The weakness in the dollar will be pretty much persistent for the rest of the year, except against the yen.”

The dollar declined 0.5 percent to $1.4326 per euro at 5:02 p.m. in New York, from $1.4254 yesterday. The common European currency hadn’t risen on four straight days against since the period through June 2. The yen dropped 0.7 percent to 135.21 yen per euro, from 134.26 yesterday. The yen fell 0.2 percent to 94.38 per dollar, from 94.19.

For the week, the dollar dropped 0.9 percent versus the euro and 0.6 percent against the yen. The Japanese currency lost 0.3 percent versus the euro this week.

‘Point of Exhaustion’

The global economy is “beginning to emerge” from a recession after aggressive action by central banks and governments, Bernanke said at a symposium in Jackson Hole, Wyoming.

Sales of existing U.S. homes climbed 7.2 percent to a 5.24 million annual rate, the most since August 2007, according to the National Association of Realtors. The gain was the biggest since records began in 1999.

Should the euro fail to stay above $1.4353, the 76.4 percent Fibonacci retracement from its eight-month high of $1.447, it would suggest “short-term weakness” in the 16- nation currency, technical analysts Tom Fitzpatrick and Shyam Devani at Citigroup Inc., wrote in a research note today.

“We now well may be reaching the point of exhaustion regarding this move,” said Ian Stannard, a London-based currency strategist at BNP Paribas SA, France’s largest bank, referring to the dollar’s decline. “Given we’ve seen these encouraging comments from Bernanke and the U.S. data, the market has been unable to sustain the initial move.”

Canadian Dollar Bulls

Canada’s currency rose as much as 1 percent to C$1.0763 per dollar, and the krone advanced 0.3 percent to 5.9987 against the dollar after oil for October delivery touched $74.72 a barrel, the highest since Oct. 21.

Citigroup and TD Securities Inc. recommended buying the Canadian dollar versus the yen as the Canada’s economy improves while commodity prices advance. The loonie will appreciate to 90 yen from 87.49 today, Citigroup said in a research note. TD Securities forecast an increase to 89.

Hedge funds and other large speculators this week raised bets to the highest level since June 2008 that the Canadian dollar will gain versus the dollar, according the Washington- based Commodity Futures Trading Commission.

The difference in the number of wagers by futures traders on an advance in the Canadian dollar compared with those on a drop, known as net longs, was 37,458 on Aug. 18, compared with net longs of 33,889 a week earlier. They trimmed the net longs on the euro by almost a third to 5,732, from 16,811 a week earlier.

‘Optimistic Tone’

An index of the German services industry rose to 54.1 this month from 48.1 in July, Markit Economics said today, citing its purchasing managers’ survey. The French manufacturing index increased to 50.2 in August from 48.1 in the prior month. Readings above 50 indicate expansion.

Economists forecast both indexes would remain below 50, according to the median estimates in Bloomberg News surveys. A composite index of both industries in the 16-member euro region rose to 50, from 47 in July.

“The European data is contributing to the optimistic tone in the market and the selling of the dollar,” said Jack Spitz, managing director of foreign exchange at National Bank in Toronto. “The important shift of the PMI data supports the view that the euro-zone economy isn’t far behind the curve.”

Deutsche Bank AG revised down its year-end forecast for the pound against the euro, because the Bank of England’s monetary policy is likely to remain looser than that of the European Central Bank. The euro gained 0.6 percent to 86.86 pence.

The pound will weaken to 89 pence per euro by the end of the year, Deutsche Bank said, revising its previous forecast of 83 pence. Against the dollar, it will end the year at $1.6750, compared with an earlier forecast of $1.57, it said.

Questionable Value

The Dollar Index, which IntercontinentalExchange Inc. uses to track the U.S. currency against the yen, euro, Swiss franc, British pound, Swedish krona and Canadian dollar, dropped for a fourth day, falling 0.4 percent to 78.04.

The dollar’s role as a good store of value is “questionable” and the currency has a high degree of risk, said Nobel Prize-winning economist Joseph Stiglitz.

“There is a need for a global reserve system,” Stiglitz, a Columbia University economics professor, said at a conference in Bangkok. Support from countries like China should ensure orderly discussions on a new reserve system, he added.

To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Sapna Maheshwari in New York at smaheshwar11@bloomberg.net

Last Updated: August 21, 2009 17:16 EDT