April 14 (Bloomberg) -- The dollar advanced for the first day in six against the yen and rose against the euro after the International Monetary Fund said yesterday the U.S. economy will grow more than four times as much as Japan and Germany this year.

The IMF lifted its estimate for growth in the U.S. while cutting projections for the Japanese and German economies. The Organization for Economic Cooperation and Development also expects faster U.S. growth, a draft document showed yesterday. The dollar is up 4.9 percent versus the yen and 5.3 percent against the euro this year.

``A good U.S. economy is going to feed into the strength of the dollar,'' said Shimpei Uike, who manages overseas debt in Tokyo at Asahi Life Asset Management Co., which has $10.5 billion in assets. ``U.S. growth prospects are becoming far more promising than that of Japan or Europe.''

The dollar rose to 107.71 yen at 9:19 a.m. in London, from 107.36 late yesterday in New York, according to electronic currency-dealing system EBS. It advanced to $1.2876 per euro, from $1.2914. The dollar may gain to 109 yen and $1.28 per euro in a week, Uike said.

The U.S. currency is also up 0.5 percent against the euro so far this week on speculation that investors who had bet against the dollar are now buying it back. The dollar rose yesterday even after a government report showed U.S. retail sales grew less than economists had forecast in March. It also gained on April 12, after the U.S. announced a record trade deficit.

``Trading activity shows that somebody is clearly buying back dollars,'' said Michael Klawitter, a currency strategist at WestLB AG in Dusseldorf, Germany. ``This is why the dollar is reacting so strangely despite the reasonably negative data.''

EU `Discord'

Demand for the euro has also dropped this week on concern French voters may reject the European Union's draft constitution in a referendum next month, said Uike at Asahi Life.

The EU is drawing up contingency plans in case France or the Netherlands vote ``no'' in referendums on the constitution, the Financial Times reported today, without saying where it obtained the information.

``The EU is the backbone of the euro and any discord within the group could damage the credibility of its currency,'' Uike said. ``Even worse, such disarray may further erode fiscal discipline of member countries, which may pursue their own interests at the expense of unity.''

Last month, the EU gave in to German, French and Italian demands to relax the enforcement of the rules, in a bid to boost an economy that will lag behind the U.S. for the 13th time in 14 years in 2005.

Diverging Growth

The IMF increased its forecast for 2005 U.S. growth to 3.6 percent, from a previous estimate of 3.5 percent. Japan and Germany will lag behind with a 0.8 percent pace, the fund said in its World Economic Outlook. The OECD also plans to lift its projection for the U.S. in 2005, while reducing forecasts for Japan and the euro region, a draft of the group's semi-annual outlook showed.

The Bank of Japan will probably say in its bi-annual economic outlook that the economy will need more time than expected to overcome deflation, forecasting prices declines will stop in the fiscal year that ends March 31, 2007, Jiji news service reported. The release is scheduled for April 28.

``We're positive on the U.S. dollar,'' said Rick Arney, a currency strategist in San Francisco at Barclays Global Investors, which manages more than $1 trillion. ``The U.S. economy is growing, when compared with other regions such as Asia and Europe.''

Yield Advantage

Any gain in the dollar may be limited should a narrowing yield advantage for U.S. Treasury securities over Japanese bonds prompt traders to scale back bets on the currency.

Yields on U.S. 10-year notes yesterday fell to the lowest in more than a month. The yield advantage over Japanese 10-year bonds held at 3.03 percentage points, near its smallest since March 14.

``A narrowing rate gap is putting the dollar on its back foot,'' said Tetsu Aikawa, a currency sales manager in Tokyo at UFJ Bank Ltd., a unit of Japan's fourth-largest lender. ``I'm not counting on a rapid rally from here.'' The dollar may drop to 107 today, he said.

To contact the reporter on this story: Taizo Hirose in Tokyo at hirose2@bloomberg.net.

Last Updated: April 14, 2005 04:20 EDT