Dollar Drops to Three-Week Low Versus Yen on Fed Rate Outlook

The dollar fell to a three-week low against the yen on speculation the Federal Reserve will reiterate next week its intention to keep interest rates near zero, damping the appeal of U.S. assets.

The euro surged to a 16-month high versus the dollar in the holiday-shortened trading week as signs that the region’s economy is gathering momentum fueled speculation the European Central Bank will raise interest rates further. The Australian dollar, the biggest winner this week among major counterparts to the greenback, climbed to a record as stock and commodity price gains drove investors to higher-yielding currencies.