Nov. 4 (Bloomberg) -- The dollar dropped from almost a one- month high versus the euro on speculation the Federal Reserve will reiterate its commitment to keeping its target lending rate near zero for an extended period.

South Africa’s rand rose against all of its major counterparts for a second day as gold climbed to a record and the nation’s central bank backed away from previous government comments that it would try to stem the currency’s advance. The Norwegian krone advanced for the first time in four days after crude oil rose above $81 a barrel.

“A weaker dollar trend starts to re-emerge after the temporary setback in risk sentiment over the past few days,” said Sverre Holbek, a Copenhagen-based analyst at Danske Bank A/S. “We are looking for the global recovery to continue in coming months. The Fed won’t change its statement drastically, which is going to further fuel risk taking.”

The dollar weakened 0.8 percent to $1.4842 per euro at 1:12 p.m. in New York, from $1.4724 yesterday, when it touched $1.4626, the strongest level since Oct. 5. The dollar will decline to $1.55 per euro in three months before recovering to $1.50 in six months, according to Holbek. The yen depreciated 1.5 percent to 134.95 per euro, from 133.01. Japan’s currency slid 0.7 percent to 90.93 per dollar, from 90.33.

The Fed is likely to repeat in its monetary policy statement today that interest rates will stay at a record low for an “extended period,” according to Citigroup Inc.

‘Cold Water’

Major central banks “have poured cold water on exaggerated market expectations of rate hikes,” Michael Hart, a London- based currency analyst at Citigroup, wrote in a note today.

The Reserve Bank of Australia said yesterday that interest- rate boosts will come gradually after it increased the benchmark cash target by a quarter-percentage point to 3.5 percent.

The Fed is “likely to retain its current statement,” Hart wrote. “Market implications are ambiguous though, and the dollar is more likely to be driven by the next payrolls release.”

Policy makers will hold the benchmark interest rate in a range of zero to 0.25 percent, according to all of the 96 economists in a Bloomberg survey.

A Labor Department report on Nov. 6 may show the pace of job losses slowed in October, while the jobless rate increased to 9.9 percent, from 9.8 percent a month earlier, according to the median forecasts in separate Bloomberg surveys.

New York University Professor Nouriel Roubini told CNBC today that the dollar may reverse its slump by jumping as much as 20 percent six months from now.

Roubini on Carry

Roubini, who warned about the coming financial crisis in 2006, said investors are executing the “mother of all carry trades” by borrowing dollars to buy commodities and emerging- market assets for higher returns. When the boom turns to bust, the U.S. currency will quickly reverse losses, he said.

To buy protection against an appreciation in the dollar versus the euro, options traders are paying the biggest premiums since December.

The one-month 25-delta risk-reversal rate for the euro versus the dollar declined to minus 1.11 percent today, the lowest level since Dec. 10. A negative reading indicates traders pay more to buy euro puts, or the right to sell the currency, than for calls, or the option to buy the currency.

Sterling rose 0.8 percent to $1.6567 as Markit and the Chartered Institute of Purchasing and Supply said a gauge of service industries rose in October to 56.9, the highest level since August 2007.

Bank of England

The Bank of England’s Monetary Policy Committee will boost asset purchases tomorrow by 50 billion pounds ($82 billion) to 225 billion pounds, according to the median forecast of 48 analysts in a Bloomberg survey.

Britain’s central bank will hold its main rate at an all- time low of 0.5 percent, according to all of the 60 economists in a Bloomberg survey. The European Central Bank also announces its policy decision tomorrow.

The rand rallied, advancing 2.5 percent to 7.6437 per dollar as gold for December delivery reached a record $1,096.20. Traders speculated that central banks and investors will purchase the precious metal to hedge against the dollar’s 5.8 percent drop versus the euro this year.

South Africa’s currency also advanced as Reserve Bank Deputy Governor Daniel Mminele said in a copy of a speech posted on the bank’s Web site yesterday that policy makers will continue accumulating reserves without intervening in the foreign-exchange market.

Gordhan on Rand

Finance Minister Pravin Gordhan said on Oct. 28 that the government may “massage” the rand because it’s too strong. Central banks intervene by buying or selling currencies to influence exchange rates.

The krone gained 1.6 percent to 5.6868 per dollar as crude oil, Norway’s biggest export, climbed as much as 1.8 percent to $81.06 a barrel. The currency gained 14 percent over the past six months as commodity prices increased.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners including the euro and yen, fell 0.7 percent to 75.861. The index gained 1.3 percent since touching the 14-month low of 74.940 on Oct. 21.

To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net

Last Updated: November 4, 2009 13:14 EST