Aug. 15 (Bloomberg) -- The dollar rose the most against the euro in more than three weeks on speculation a Treasury Department report today will show foreign investors are buying U.S. assets at a faster pace.

The Treasury Department may say investors outside the U.S. bought a net $64.5 billion of U.S. financial assets in June, the most since February, according to the median forecast in a Bloomberg survey. A widening yield advantage on U.S. Treasury securities compared with European debt has helped spur a 9 percent rally in the dollar against the euro so far this year.

``Investment into the U.S. has held up pretty well and people are very optimistic about today's data,'' said Ian Stannard, a currency strategist at BNP Paribas SA in London. ``A number above $60 billion would be enough to boost the dollar.''

Against the euro, the dollar rose to $1.2364 at 7:28 a.m. in New York, from $1.2441 on Aug. 12, according to electronic foreign-exchange dealing system EBS, the biggest gain since July 22. It was also at 109.59 yen, from 109.38. The U.S. currency may reach $1.22 per euro this week, Stannard said.

The $64.5 billion figure expected from today's Treasury International Capital report would exceed the $58.8 billion U.S. trade deficit reported by the Commerce Department on August 12. In May, foreign investors bought a net $60 billion of U.S. Treasuries, corporate bonds, stocks and other financial assets.

``For an investor, it's hard to argue against buying U.S. assets,'' said Adrian Schmidt, head of currency strategy at Royal Bank of Scotland Plc in London. ``People are going to continue to invest in U.S. securities and we have some scope for the dollar to rise.''

The Treasury report is scheduled for 9 a.m. in Washington.

`Very Attractive'

Demand from international investors, who hold almost half of all U.S. government debt, climbed at a sale of 10-year U.S. Treasury notes last week. The Aug. 11 auction showed foreign central banks and investors that bid through so-called primary dealers bought 46.9 percent of the $13 billion of 10-year notes sold, the most since June 2003.

``The premium that the U.S. now has above Europe is very attractive,'' said Marcus Ostwald, a fixed-income strategist at broker Monument Securities in London. The dollar's drop toward $1.25 per euro last week wasn't justified by the higher yields offered by Treasuries compared with European bonds, he said.

The extra yield investors demand to own U.S. 10-year Treasuries compared with German bunds with similar maturity is 97 basis points, or 0.97 percentage point. The gap, or spread, reached a five-year high of 104 basis pints on July 29.

China Purchases

Last month's Treasury report showed China pared back its pace of buying U.S. government debt. Chinese investors, including the central bank, bought a net $3 billion of Treasuries, down from $17 billion in May.

China's central bank purchased Treasuries with its foreign exchange reserves, the dollars it got while defending the yuan's former peg against the dollar. Since July 21, the yuan is being valued against currencies including the euro, yen and South Korean won, forcing China to change the makeup of its reserves.

Gains in the dollar may be limited against the yen as traders turn more bullish on the Japanese currency because of optimism the country's economy is strengthening.

Sixty-eight percent of 60 traders, strategists and investors surveyed by Bloomberg News on Aug. 12 from Sydney to New York advised buying the yen against the dollar, up from 51 percent a week ago and the most since November. A majority also advised purchasing the yen versus the euro.

Japanese Economy

Traders may buy the yen on speculation Japan's economic expansion will extend into the fourth quarter and as support for Japanese Prime Minister Junichiro Koizumi is rising before Sept. 11 national elections.

A report last week showed the world's second-biggest economy expanded in the first half at more than double the pace of the past five years. Koizumi called the elections on Aug. 8 after his plan to sell the nation's postal service was defeated.

Koizumi had a job-approval rating of 51 percent in a survey taken by the Mainichi newspaper on Aug. 13 and Aug. 14, an increase of 14 percentage points from last month. In a separate survey taken by Fuji Television Network, Koizumi had an approval rating of 57.2 percent, the Sankei newspaper said.

``Increases in approval rates are weakening political uncertainty, giving positive effects on the yen,'' said John Horner, a currency strategist at Deutsche Bank AG in Sydney.

The prime minister called the elections in response to the defeat of his plan to sell the nation's postal service on Aug. 8. Koizumi, the longest-serving prime minister since 1987, staked his career on a sale that aimed to end government control of Japan Post's 350 trillion yen ($3.1 trillion) of assets.

Technical Gauges

The dollar may also gain on speculation last week's 2.3 percent slide against the yen and 0.7 percent drop versus the euro was excessive.

The yen's 14-day relative strength index to the dollar was 36.99, approaching a level that signals gains may be excessive. The gauge of momentum in a given period was 57.29 on Aug. 1. A level above 70 or below 30 may signal a reversal of fortunes. Against the euro, the dollar had a reading of 60.

``The U.S. dollar is within days of a turn higher, bulls should hang tough,'' said Craig Ferguson, a currency strategist at Australia & New Zealand Banking Group Ltd. in Melbourne. ``The euro is now as overbought on daily measures as it was back in early March at $1.3480.''

To contact the reporters on this story: Rodrigo Davies in London at rdavies13@bloomberg.net.

Last Updated: August 15, 2005 07:30 EDT