The dollar fell to a record against the euro and weakened
versus the yen on speculation U.S. growth is losing
momentum, adding to pressure on the Federal Reserve to
reduce interest rates again.
The U.S. currency depreciated to a 15-year low against a
basket of six of its major peers before data tomorrow
forecast to show the lowest home resales in five years and
a drop in consumer confidence. European Central Bank board
member Christian Noyer said today a sudden shift in the
dollar could ``seriously hamper'' global economic growth.
``Dollar weakness will persist,'' said Alan Ruskin, a
senior currency strategist in Greenwich, Connecticut, at
RBS Greenwich Capital Markets Inc. ``Housing is a major
problem for the U.S. economy, and it isn't going to go
away. This is a dollar-negative play.''
The dollar traded at $1.4088 per euro at 1:33 p.m. in New
York, compared with $1.4091 on Sept. 21. The U.S. currency
fell to a record for a third day, touching $1.4130 against
the euro, which debuted in January 1999. The dollar
weakened 0.6 percent to 114.85 yen and slid to $2.0219 per
pound from $2.0203. The yen rose 0.9 percent to 161.79 per
euro.
The U.S. dollar has fallen against 13 out of the 16 most
actively traded currencies this quarter, depreciating 4
percent against the euro and 7.2 percent versus the yen.
For the year, the dollar is down 6.7 percent against the
euro and 3.7 percent versus the yen.
``The U.S. economic outlook argues for further weakness in
the dollar,'' said Ian Stannard, senior currency strategist
in London at BNP Paribas SA. ``We expect the U.S. economy
to slow quite rapidly over the course of the next few
quarters. That will lead to further rate cuts.''
Dollar Indexes
The dollar fell today to the lowest since September 1992 on
the New York Board of Trade index that measures its value
against six major currencies. The Fed trade-weighted dollar
index of major currencies dropped on Sept. 20 to the
weakest since its inception in 1971.
The central bank on Sept. 18 cut its benchmark interest
rate by a half-percentage point to 4.75 percent. The
European Central Bank's rate is 4 percent, and the Bank of
Japan's is 0.5 percent, the lowest among industrialized
nations.
Futures contracts show 70 percent odds of a quarter-
percentage point cut to 4.5 percent at the Fed's next
meeting Oct. 31, up from a 26 percent likelihood a week ago.
The U.S. currency fell today to the weakest against the
Norwegian krone since November 1981 and an eight-week low
versus Malaysia's ringgit.
`Complaints From Europe'
The euro erased its earlier gains against the dollar after
European officials including Noyer expressed concern over
the currency's rise. Luxembourg Prime Minister and Finance
Minister Jean-Claude Juncker said the European Union is
watching currency fluctuations.
``There's a good chance that complaints from Europe will
pick up and that those complaints will carry more weight,''
said Thomas Harr, senior foreign-exchange strategist in
Singapore at Standard Chartered Plc.
The Group of Seven industrial nations will discuss the
strength of the euro at their regular meeting in Washington
next month, the Financial Times Deutschland reported today
without citing its source.
European Industries
Europe's manufacturing and services industries grew this
month at the slowest pace since 2005, a report showed Sept.
21. The manufacturing index declined to 53.2 from 54.3,
while the gauge of services fell to 54 from 58. Both
numbers were lower than economists forecast. A level above
50 indicates growth.
The ECB cut its growth estimate for countries that use the
euro to 2.5 percent from 2.6 percent, joining the European
Commission and the International Monetary Fund in becoming
more pessimistic. The economy grew 2.8 percent last year,
the fastest since 2000.
``The euro rally is a bit overdone at this point,'' said
Michael Malpede, a senior currency analyst in Chicago at
Man Global Research. ``Political rhetoric on the euro is
rising. But right now the market isn't paying a lot of
attention. A negative dollar is still the overriding
sentiment in the market.''
The dollar will rise to $1.38 versus the euro by year-end,
according to the median of 46 analyst forecasts compiled by
Bloomberg News.
The National Association of Realtors will probably report
tomorrow that U.S. home resales fell 4.5 percent last month
to an annual rate of 5.49 million, according to the median
forecast of 67 economists surveyed by Bloomberg News. The
New York-based Conference Board will say its index of
consumer confidence decreased to 104.4 this month from 105
in August, according to the median forecast of 66
economists surveyed by Bloomberg.
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