The dollar traded within 0.2 percent of its lowest in a week against the euro on speculation Federal Reserve Chairman Ben Bernanke will reiterate today that a slow U.S. recovery warrants near-zero interest rates.
The greenback remained lower after yesterday falling versus 15 of 16 major peers after gains in U.S. stocks boosted demand for higher-yielding assets. The euro neared a four-month high against the yen before reports this week forecast to show German services and factory output grew in March. Australia’s dollar approached a 10-month high against the yen after minutes showed the Reserve Bank left rates unchanged this month after seeing “somewhat less” downside risk to the economy.
“The Fed is not going to change their recent rhetoric on the economy and they’re going to still characterize the recovery as somewhat tepid,” said Andrew Salter, a strategist at Australia & New Zealand Banking Group Ltd. (ANZ) in Sydney. “The long-term trend that’s in place is U.S. dollar weakness.”
The dollar was at $1.3242 per euro as of 9:16 a.m. in Singapore from $1.3238 in New Yorkyesterday, when it fell as low as $1.3266, the least since March 9. It fetched 83.35 yen from 83.35. The euro bought 110.38 yen from 110.34 after rising as high as 110.57 yesterday, the most since Oct. 31.
Bernanke said March 14 that a “frustratingly slow” recovery in the world’s largest economy was impeding efforts by banks to make profitable loans. Policy makers said the previous day that “elevated” unemployment and a subdued outlook for inflation warranted keeping borrowing costs “exceptionally low” at least through late 2014.
Dollar Declines
Bernanke will give the first of four lectures at George Washington University today and testify before a U.S. House committee about Europe’s debt crisis on March 21.
The dollar has declined 0.6 percent in the past week, the third-worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro has gained 0.7 percent and the yen declined 1.2 percent.
Liquidity in currency markets will be thin today due to a public holiday in Japan, UBS AG said in a research note.
Demand for the 17-nation euro may be bolstered before March 22 data from London-based Markit Economics that’s predicted to show manufacturing and services growth accelerated inGermany. Factory output climbed to 51 this month from 50.2 in February while a gauge of services rose to 53.1 from 52.8, according to the median estimate in Bloomberg News surveys of economists.
ANZ Bank’s Salter predicts the euro will climb to $1.35 by June and $1.37 by September. The currency will trade at $1.29 and $1.30, respectively, according the median forecast in a Bloomberg survey of analysts.
Downside ‘Less Likely’
Australia’s dollar rose toward its highest level in 10 months against the yen after Reserve Bankminutes showed an intensifying mining investment boom and Europe’s easing debt crisis prompted policy makers to keep rates unchanged at 4.25 percent this month.
“Members noted that while this downside risk could still materialize, this seemed somewhat less likely than a few months ago,” the minutes released today by the RBA showed.
The Aussie rose 0.2 percent to 88.55 yen after reaching 88.64 on March 19, the most since May 3. It bought $1.0624 from $1.0607 yesterday.
To contact the reporter on this story: Candice Zachariahs in Sydney atczachariahs2@bloomberg.net
To contact the editor responsible for this story: Garfield Reynolds in Sydney atgreynolds1@bloomberg.net
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