NEW YORK (Bloomberg) — The dollar fell for the first time in three weeks against the euro as calls for a "strong" US currency failed to reassure investors concerned the government and Federal Reserve will accept declines in the greenback.

Traders shifted funds to Australia's dollar, making it the best performer this week among 16 major currencies. Lawrence Summers, head of President Barack Obama's National Economic Council, said on last Thursday the US is committed to a strong dollar, the same day European Central Bank President Jean-Claude Trichet said it's "important" to keep supporting the policy.

"Officially they have to say something like that," said Hidetoshi Yanagihara, senior currency trader at Mizuho Corporate Bank in New York. "As long as the Fed keeps the current policy, too much excess money will push the dollar lower."

The dollar fell 1.1 percent to $1.4732 per euro on Friday in New York, from $1.4576 on October 2, in the first weekly decline since its one percent slide in the five days ended September 18.

The US currency was little changed at 89.78 yen, compared with 89.81, before the Bank of Japan's meeting next week. The euro climbed one percent to 132.25 yen.

Summers, the White House economic adviser, reiterated the administration's commitment to a strong dollar this week, citing recent comments by US Treasury Secretary Timothy Geithner.

"He made it very clear that our commitment is to a strong dollar based on strong fundamentals," Summers said last Thursday at a forum in New York organised by Bloomberg LP, the parent of Bloomberg News. "Any idea that nations can devalue their way to prosperity is one that economic experience very much belies."

Geithner said on October 3 after a meeting of Group of Seven financial officials that "it is very important to the United States that we continue to have a strong dollar". Trichet echoed Geithner in his October 8 press conference following the decision to hold the ECB's main refinancing rate at a record low of one percent, saying it's "very important" for US policy makers to support the dollar.

The six-currency Dollar Index fell 0.85 percent to 76.35 this week, the lowest level since August 2008, on concern the Treasury and Fed may permit a gradual weakening of the US currency to support the nation¿s economic recovery.

"Clearly the market is having some problems believing the US authorities' strong-dollar policy," said Carl Hammer, a senior global analyst at SEB AB in Stockholm. "It's obviously quite easy for the US to be content with a weaker dollar in order to reflate the economy."

The Australian dollar rose 4.4 percent to 90.36 US cents in the biggest weekly gain since May after the Reserve Bank unexpectedly raised the overnight cash target by a quarter-percentage point to 3.25 percent on October 6. A report two days later showed an unexpected drop in the unemployment rate in September, adding to speculation the central bank will widen the extra yield paid on short-term money market securities further.

The premium of the three-month London interbank offered rate for the Australian dollar compared with the US widened 25 basis points, or 0.25 percentage point, to 338 basis points this week, according to the British Bankers' Association. The difference is within 10 basis points of the widest this year.

An investor who borrowed dollars and then sold them to deposit the funds in Australia would have earned 4.4 percent this week, according to data compiled by Bloomberg.