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By Bloomberg

The dollar held a three-day decline as signs of an uneven U.S. economic recovery caused investors to adjust their outlooks for interest rates next year before the Federal Reserve sets monetary policy today.

The U.S. currency slipped to a one-week low versus a basket of major counterparts after data yesterday showed orders for durable goods unexpectedly fell. The greenback fell versus most of its 16 major peers as investors await the outcome of the Fed's two-day meeting after it said in September it would end quantitative easing this month if the economy keeps improving. Norway's krone dropped as reports showed unemployment was higher than analysts forecast while retail sales unexpectedly slid.

"The Fed will want to be flexible because low inflation allows central banks not to be in a rush to raise interest rates," said Roberto Mialich, a senior currency strategist at UniCredit Bank AG in Milan. "That is not something that will hurt the dollar. But if the Fed lets the market think more quantitative easing is possible, that will be dollar negative."

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major counterparts, was little changed at 1,062.83 at 6:38 a.m. New York time, after touching 1,062.32, the lowest level since Oct. 21.

The dollar was at $1.2741 per euro after declining 0.7 percent in the previous three days. It was little changed at 108.11 yen. Japan's currency appreciated 0.1 percent to 137.74 per euro after reaching 137.81, the weakest since Oct. 9.

Confidence Increases

Bookings for goods meant to last at least three years decreased 1.3 percent after falling 18.3 percent in August, a U.S. Commerce Department report showed yesterday in Washington. The Conference Board's index of consumer confidence advanced to a seven-year high in October, the New York-based private research group said yesterday, exceeding the most optimistic projection in a Bloomberg survey of economists.

The Norwegian krone dropped 0.6 percent, the biggest slide since Oct. 22, to 6.6530 per dollar. It reached 6.6787 on Oct. 16, the weakest in more than four years. It depreciated 0.6 percent to 8.4735 per euro, having declined last week to its lowest since July.

Retail sales shrank 0.1 percent in September from a 0.6 percent gain the previous month, data from Statistics Norway showed today. That compares with the median prediction of a 0.7 percent gain in a Bloomberg survey of economists. The jobless rate increased to 3.7 percent in August, from 3.4 percent the prior month, another report showed.

Swedish Rates

Yesterday, Sweden's krona slumped to the weakest level in four years after the central bank cut the main interest rate to zero and delayed tightening plans as it fights deflation. Sweden's currency was little changed at 7.3246 per dollar after depreciating to 7.3829 yesterday.

Bloomberg's dollar index is down 0.7 percent since Sept. 30, set for the first losing month since June, as traders cut bets on an early Fed rate increase. The odds of borrowing

costs going up by October 2015 are at 50 percent, from 85 percent on Sept. 30. Policy makers have kept their key rate at zero to 0.25 percent since December 2008.

"The end of QE is all but certain, but the question is how the Fed views the mixed economic data," said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. "If the statement retains the phrase that rates will stay low for a 'considerable time,' the immediate reaction may be to sell the dollar."