Jan. 24 (Bloomberg) -- The euro rose against the dollar and the yen after a survey sponsored by Royal Bank of Scotland Group Plc showed central banks are boosting their euro holdings at the expense of the U.S. currency.

The 12-nation currency also strengthened after failing to weaken last week much beyond $1.2930, its highest level until Nov. 5, said Karen Jones, a technical analyst at Commerzbank AG in London. The dollar is up about 4 percent from a record low of $1.3666 on Dec. 30.

``The dollar's rally is unsustainable,'' said Callum Henderson, global head of currency strategy in Singapore at Standard Chartered Plc. ``Central bank diversity is still out there as a negative; the report is pushing the dollar down a little.''

Against the euro, the dollar declined to $1.3081 at 10:10 a.m. in London from $1.3039 late on Jan. 21 in New York, according to currency-trading system EBS. The 12-nation currency climbed to 134.49 yen from 133.90. The yen traded at 102.82 per dollar from 102.70.

``It's possible that the correction in the dollar is done,'' said Jones. Still, ``my feeling is that we'll try to retest the $1.2930 level.'' Should the euro appreciate beyond $1.3150, the currency may extend its gains, she said.

Favoring Euros

Almost 70 percent of the 56 central banks that provided details of changes in their reserves said they increased exposure to the 12-nation currency, according to the survey conducted by Central Banking Publications Ltd., a London-based publisher, between September and December 2004. Fifty-two percent said they reduced exposure to the dollar.

``It only takes about a 1 percent shift in these reserves to have implications for the dollar,'' said Michael Metcalfe, a senior strategist in London at State Street Corp., the world's largest managers of funds for institutional investors. ``This isn't going away anytime soon.''

The share of dollars in total reserve holdings was 63.8 percent at the end of 2003 from 63.5 percent in 2002 and down from 66.9 percent in 2001, the International Monetary Fund said in its annual report in April 2004. The euro proportion rose to 19.7 percent from 19.3 percent in 2002 and 16.7 percent in 2001.

The yen has fallen 1 percent versus the dollar since reaching a five-year high of 101.69 on Jan. 17. Bank of Japan Governor Toshihiko Fukui on Jan. 19 said the yen's gain threatens a recovery in the world's second-largest economy.

Japan's currency may weaken on concern an increase in crude oil prices will further slow the pace of economic expansion, said Robert Rennie, a currency strategist in Sydney at Westpac Banking Corp. Japan imports almost all its oil.

`Downbeat on Japan'

Investors ``are much less positioned to buy yen right now, and with good reason,'' said Rennie. ``The market is downbeat on recent Japanese data. Oil is not helping the yen.''

The government will probably say Jan. 28 that Japanese industrial output fell 1.2 percent last month, based on the median forecast of 33 economists surveyed by Bloomberg News.

Participants in Bloomberg's weekly currency survey were less bullish on the yen. Forty-one percent of the 46 traders, analysts and investors polled from Tokyo to New York on Jan. 21 recommended buying the Japanese currency against the dollar, down from 56 percent a week earlier. Twenty-eight percent said to sell, up from 15 percent. The remainder advised holding.

Crude oil futures rose for a second day, gaining 1.3 percent to $49.16 a barrel in after-hours electronic trading on the New York Mercantile Exchange. The March contract rose 2.6 percent to $48.53 a barrel on Jan. 21, the highest close since Nov. 30.

The Organization of Petroleum Exporting Countries, which pumps more than a third of the world's oil, meets to consider production on Jan. 30. Oil futures have gained 20 percent since Dec. 10, when OPEC said it would cut production from Jan. 1.

``The events this week are negative for the yen,'' said Ashley Davies, a currency strategist in Singapore at UBS AG. The yen may fall to 138 per euro in the next few weeks, he said.

To contact the reporter on this story: Richard Blackden in London at rblackden@bloomberg.net

Last Updated: January 24, 2005 05:15 EST