Dollar Falls to 16-Month Low Against Euro Amid Fed Speculation
Apr 26, 2011 5 Comments ›› Angelia
The dollar fell to a 16-month low versus the euro on speculation the Federal Reserve will consider further easing measures to support the U.S. economy after its bond-buying program expires in June.
The euro advanced for a fourth day against the yen before a report that economists say will show the region’s industrial orders increased, adding to evidence that the European Central Bank may raise interest rates. The Australian dollar climbed to a record before a government report forecast to show inflation quickened in the first quarter.
“The Fed is clearly doing nothing for a while, whereas the ECB and others are going to keep raising rates,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation’s largest lender. “I still see the dollar being weak and the euro will keep pushing higher.”
The dollar weakened to $1.4686 as of 9:21 a.m. in Tokyo from $1.4644 in New York yesterday after reaching $1.4714, the lowest since December 2009. It was at 81.56 yen from 81.55 yen. The euro rose to 119.75 yen from 119.42.
The Dollar Index touched the lowest level in more than two years as the central bank began a two-day policy meeting that will be followed by Chairman Ben S. Bernanke’s first press conference after a policy decision.
The gauge, which IntercontinentalExchange Inc. uses to track the dollar against the currencies of six major U.S. trading partners, fell to 73.504 today, the lowest level since August 2008.
Fed Meeting
The Fed will leave its target rate for overnight lending between banks at zero to 0.25 percent, according to all economists surveyed by Bloomberg News. The central bank may say it plans to complete $600 billion in Treasury purchases by the end of June, a program known as quantitative easing.
“Not only did strong global risk appetite weigh on ‘safe haven’ currencies like the dollar, but expectations the Federal Open Market Committee will toe a relatively dovish line provided headwinds for the dollar,” John Kyriakopoulos, Sydney-based head of currency strategy at National Australia Bank Ltd., wrote in a research note today.
The euro advanced for a seventh day against greenback, the longest winning streak since March 19, 2009, amid signs growth in the 17-nation region is quickening.
Industrial orders in the euro area rose 1.5 percent in February from the previous month, when they increased a revised 1.2 percent, according to economists surveyed by Bloomberg before the data today.
Australia’s CPI
The ECB, which aims to keep inflation below 2 percent, this month raised interest rates by a quarter-percentage point to 1.25 percent. It left the door open for more rate increases even as a sovereign debt crisis tempers growth in peripheral countries such as Greece, Portugal and Ireland.
The Australian dollar, known as the Aussie, gained as much as 0.4 percent to $1.0824, the highest since the currency was freely floated in 1983. The nation’s inflation accelerated to 1.2 percent in the three months ended March 31 from 0.4 percent in the previous quarter, according to economists surveyed by Bloomberg News before today’s report.
The New Zealand dollar reached 80.88 U.S. cents, the highest since March 2008, from 80.57 cents yesterday. The Reserve Bank of New Zealand will hold a policy meeting tomorrow and is expected to maintain is benchmark rate unchanged at 2.5 percent.
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