The dollar declined beyond $1.41 against the euro for the first time this year as growing evidence the global recession is easing sent investors in search of assets with higher returns.
The U.S. currency also headed for its biggest monthly drop versus the euro in 2009 and fell today against major counterparts including the Australian and New Zealand dollars as South Korea said its state pension fund plans to hold fewer Treasuries. The U.S. securities were poised for a second month of declines on concern debt sales will overwhelm demand.
Sterling increased as much 1.5 percent to $1.6183, the highest level since Nov. 5, and headed for its biggest monthly gain since 1985 after Nationwide Building Society said U.K. house prices unexpectedly jumped 1.2 percent in May and the market researcher GfK NOP reported consumer confidence matched the highest level in almost a year.
Investors are selling dollar-denominated assets such as Treasuries as the U.S. government’s budget shortfall quadruples to $1.85 trillion.
The greenback fell against most of the 16 major currencies tracked by Bloomberg as South Korea’s National Pension Service, which had 236 trillion won ($187 billion) of assets at the end of 2008, said it pared its allocation for Treasuries over the next five years.
International investors own about 51 percent of the $6.36 trillion in marketable U.S. government debt outstanding, up from 35 percent in 2000, according to data compiled by the Treasury.
South Korea is the latest holder of U.S. government debt to reduce its holdings. China, the largest foreign owner of Treasuries, said in March it was “worried” about its $767.9 billion investment and looking for assurances the value of its holdings would be protected. China has shifted holdings into bills from notes, which are more at risk when interest rates rise.
The Japanese currency declined 1.8 percent against the euro this week as prospects for a global recovery spurred Japanese investors to look abroad for higher returns.
Japanese investors bought 641.1 billion yen ($6.61 billion) more overseas bonds and notes than they sold in the week ended May 23, the biggest net purchases in a month, according to the finance ministry.
U.S. gross domestic product shrank at a 5.7 percent annual pace in the first quarter, less than what was estimated last month, the Commerce Department reported today in Washington.
The euro rose versus the dollar after Germany’s Wiesbaden- based Federal Statistics Office said retail sales, adjusted for inflation and seasonal swings, rose 0.5 percent in April, the first increase in four months.

Stocks were mixed in volatile trading Friday as shares of energy producers advanced on higher oil prices and the cloudy economic outlook weighed on the broader market.
The major indexes are all on track to end May with slight gains, bringing the increase from the lows of early March to about 30%. But the market has been in a holding pattern recently as investors look for evidence that the economy has not only stabilized, but is poised to begin growing again.
Oil prices rose above $66 a barrel as the dollar fell sharply against rival currencies. Energy stocks, such as Exxon Mobil and Chevron, were both about 0.5% higher.
The government said first-quarter gross domestic product fell at a revised annual rate of 5.7%, narrower than the originally reported 6.1%. Economists expected the revision to result in a 5.5% rate of decline.
A measure of business activity in the Midwest surprisingly fell in May. The ISM-Chicago Purchasing Managers Index dropped to 34.9 in May from 40.1 in April, signaling contraction. Economists had expected it to rise to 42.
After the stock market closed Thursday, reported a drop in sales and earnings. The company said a slowdown in PC sales pressured its bottom line. Dell shares slipped 0.8% after advancing earlier in the session.
Shares of General Motors fell below $1 for the first time since the Great Depression as the troubled automaker appeared set to enter bankruptcy early next week.
Stocks around the world rose on the back of Wall Street's rally. In Japan, the Nikkei added nearly 1%. European markets closed higher.
NYMEX oil for July delivery rose $1.11 to $66.19 a barrel. The price of oil has nearly doubled from the lows of mid February on a weaker dollar and bets energy demand will pick up as the economy recovers.
COMEX gold for August delivery was up $16.60 an ounce to $979.80.

Resistance 3:Y97.40
Resistance 2:Y96.70
Resistance 1:Y96.20
Current price: Y95.50
Support 1: Y95.20
Support 2: Y94.40
Support 3: Y93.80
COMMENTS: The pair practically completely blocked yesterday's achievements. The nearest support is on Y95.20 (session low). In case of overcoming this level it is possible to expect decrease in area Y94.40 (May 25 low). Below the low of May 22 (Y93,80) is located. Intermediate resistance - Y96.20 (hourly low). More important level is located on Y96.70 (May 19 high). Above is possible growth to Y97.40 (61,8%FIBO of Y99,55-Y93,80 falling).

Resistance 3:Chf1.1240
Resistance 2:Chf1.0960
Resistance 1:Chf1.0800
Current price: Chf 1.0690
Support 1:Chf1.0650
Support 2:Chf1.0530
Support 3:Chf1.0370
СOMMENTS: The dollar continues to sustain losses. The nearest level of support is in the field of a session low on Chf1.0650/10. On Chf1.0530 is area of Dec 31 low. Key level remains in the field of Chf1.0370 (low of December).
The nearest strong level of resistance is Chf1.0800 (area of May 22, 26 and 27 lows). Not less strong level of resistance is Chf1.0960 (area of May 28 high, May 13 and 20 low). Overcoming of this level will open road to Chf1.1240 (area of May 4-5 and Apr 6 lows).

Resistance 3:$1.6800
Resistance 2:$1.6500
Resistance 1:$1.6200
Current price: $1.6170
Support 1: $1.6090
Support 2: $1.5850
Support 3: $1.5600
COMMENTS: The sterling remains supported. Overcoming of the nearest resistance $1.6200 (session high) will open road to area $1.6500. Above, on $1,6800, the level 50,0% FIBO of $2,0130-$ 1,3520 falling is located. The nearest support is the level $1.6090 (May 27 high). Below loss can increase up to $1.5850 (yesterday's low), and then - to $1.5600 (23,6% FIBO of $1,3650-$ 1,6200 growth).

Resistance 3: $1.4600
Resistance 2: $1.4360
Resistance 1: $1.4160
Current price: $1.4160
Support 1: $1.4000
Support 2: $1.3860
Support 3: $1.3740
COMMENTS: The pair remains in the field of the high reached today which is the nearest strong resistance (50,0% FIBO of falling $1,6030-$ 1,2330). Overcoming of the given level will open road to $1,4360 (Dec 29 high) and further to $1,4600 (61,8%). Support is marked in area $1.4000 (earlier resistance). Below probable decrease to $1,3860 (23,6% FIBO of $1,2880-$ 1,4160 growth) and further to $1.3740/20 (May 21 low, peak of May 13 and 38,2%).