Volatility among major currencies fell to the lowest since 2007as global central-bank balance sheets continue growing, drivingmore liquidity into financial markets, even as the economyworldwide recovers.

Australia's dollar rose the most in almost two weeks against itsU.S. counterpart before a report economists forecast will showinflation accelerated. The yuan touched a 14-month low as China'slargest manager of distressed debt said the country's soured-loanratio increased “significantly.” The dollar fell for the first timein eight days against a basket of peers before the FederalReserve's policy meeting next week.

“The water is becalmed, and here on there's not much that'sgoing to change it,” Marc Chandler, the global head of currencystrategy in New York at Brown Brothers Harriman & Co., said inan interview on Bloomberg Radio's “Surveillance” with Tom Keene andMichael McKee. “The Fed is buying more long-term assets than whenthey first announced QE3 in September 2012. We also know theEuropean Central Bank and Bank of Japan may have to do more, sowe're not at the peak of the balance sheets.”

JPMorgan Chase & Co's Group of 7 Volatility Index dropped to6.63 percent at 5 p.m. New York time, approaching the record low of5.73 percent reached in June 2007 and down from a record 27 percentin October 2008, shortly after the collapse of Lehman BrothersHoldings Inc.

The Bloomberg Dollar Spot Index, which tracks the U.S. currencyagainst 10 major peers, slipped 0.03 percent to 1,011.18 afterrising 0.6 percent the prior seven sessions. The yen was littlechanged at 102.62 per dollar. The 18-nation shared currency rose0.1 percent to $1.3805 and 141.66 yen.

Krona, Rand, Yuan

Sweden's krona gained 0.3 percent against the euro, the biggestadvance among major currencies, after touching its weakest level inalmost two years yesterday versus the shared currency.

South Africa's rand dropped with developing-economy currenciesas Ukraine's president urged the resumption of an offensive againstmilitants in the east amid the collapse of an agreement with Russiato ease tensions. The rand declined 0.5 percent versus thegreenback to 10.5472.

The pound rose to the strongest level in seven weeks versus theeuro amid speculation Bank of England minutes tomorrow will showpolicy makers are moving closer to raising borrowing costs. Thepound added 0.1 percent to 82.05 pence per euro after gaining to81.98, the strongest since Feb. 28.

The yuan plunged after China Huarong Asset Management Co.Chairman Lai Xiaomin said in comments from an April 15 meetingreleased today that China's bad-loan ratio increased in the firstquarter amid a “grim and complicated” business environment. China'syuan fell 0.2 percent to 6.2375 per dollar after depreciating to6.2390 earlier today, the weakest level since February 2013. ThePeople's Bank of China cut the currency's reference rate by 0.03percent to 6.1610 per dollar, the lowest level since Sept. 10.

'Rate Hike'

The Aussie gained versus all of its 16 major counterparts beforethe government releases its consumer price index tomorrow.

The trimmed mean gauge of Australian consumer prices was 2.9percent in the first quarter from a year earlier, up from aninflation rate of 2.6 percent in the previous three months,according to the median forecast of economists in a Bloomberg Newssurvey before the Bureau of Statistics issues the data.

The RBA said this month inflation is expected to stay consistentwith its target over the next two years. The central bankreiterated in minutes published last week of its April 1 meetingthat the most prudent course is likely to be a period of interestrates on hold. It targets average annual inflation of 2 percent to3 percent.

“It doesn't appear to me that the market is expecting a softinflation number,” Robert Lynch, a currency strategist at HSBCHoldings Plc in New York, said of Australia in a phone interview.“It might suggest to some people that they might bring the timingfor the first rate hike in the cycle a bit forward.”

The Australian dollar gained 0.4 percent to 93.67 U.S. centsafter rising as much as 0.5 percent, the biggest increase sinceApril 10.

Fed Taper

The dollar extended a drop earlier as house closings, whichtypically take place a month or two after a contract is signed,fell 0.2 percent to a 4.59 million annual rate, the lowest levelsince July 2012, the National Association of Realtors reportedtoday in Washington. The median forecast of 75 economists surveyedby Bloomberg called for sales to slow to a 4.56 million annualrate.

U.S. house prices rose in February, with the 0.6 percent jumpexceeding the median forecast for a 0.5 percent gain in a Bloombergsurvey, according to data from the Federal Housing Finance Agency.It followed a revised 0.4 percent increase the prior month.

The Fed is in the process of reducing its third round ofquantitative easing, in which it buys $55 billion of bonds a month,down from $85 billion last year, to support the economy. The buyinghas pushed the central banks's balance sheet to a record $4.3trillion. The central bank's next policy meeting is April29-30.

While the Fed pares back buying, the Bank of Japan will probablydouble purchases of exchange-traded funds in a second round ofeasing in months ahead, according to a Bloomberg survey ofeconomists. European Central Bank President Mario Draghi said thismonth the central bank may ease policy to address the euro'sadvance.

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.