US focus: Dollar falls as China interest rate decision spurs demand for risk assets

The dollar fell against most of its major counterparts as China refrained from raising interest rates, lifting stock markets at the expense of safer assets.

“There is some relief they didn’t tighten, as the expectation was, with inflation that high and the economy doing so well that we would’ve seen a tightening over the weekend from the central bank of China,” said Camilla Sutton, a Bank of Nova Scotia currency strategist. “The U.S. dollar is relatively weak and risk assets like Australia and Norway are outperforming.”

Consumer prices in China rose a more-than-forecast 5.1% in November from a year earlier, statistics showed during the weekend. “Chinese stocks had a big rally,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp.. “You have good conditions for a bounce in risk. Against that background, the dollar’s getting sold.”

The dollar weakened against the yen and the euro and declined for the third straight day against the Australian dollar and fourth day against the Canadian currency.

The Canadian dollar extended this month’s increase to 2% versus the dollar, trading within half a cent of parity. The fourth straight days of gains is the longest winning streak in more than a month.

The euro extended its gains after Moody’s Investors Service Inc. said the U.S. tax-cut package up for a procedural vote in the Senate boosts the chances for a negative outlook on the U.S. credit rating.

The dollar rallied last week after President Barack Obama said he would accept lower tax rates onhigh earners’ income, dividends, capital gains and estates for the next two years in exchange for extending federal unemployment insurance and a one- year cut in payroll taxes.

The pound declined after housing prices fell for the second consecutive month in December. A