BLBG: Dollar Declines as U.S. Housing Starts Fall More Than Forecast
By Ye Xie and Kim-Mai Cutler
Oct. 17 (Bloomberg) -- The dollar fell against the yen after a government report showed U.S. housing starts dropped in September more than economists forecast.
The yen appreciated versus the euro, the Australian dollar and the Norwegian krone as a decline in U.S. stock-index futures encouraged investors to sell higher-yielding assets and pay back low-cost loans in Japan's currency.
``If you look at the state of the economy and corporate America, we are going to be in a fairly tough situation for quite some time,'' said Fabian Eliasson, vice president of currency sales at Mizuho Corporate Bank Ltd. in New York. ``The dollar will be under pressure mainly against the yen. The yen will be the strongest currency going forward.''
The dollar decreased 0.7 percent to 100.90 yen at 9:02 a.m. in New York, from 101.57 yesterday. The greenback will fall below 100 ``easily,'' Eliasson said. The dollar rose 0.1 percent to $1.3439 per euro from $1.3456. The euro dropped 0.8 percent to 135.65 yen from 136.73 yesterday.
The yen gained 2.4 percent to 68.55 against the Australian dollar and 1.9 percent to 15.29 versus the krone on speculation investors will unwind trades in which they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's 0.5 percent target lending rate compares with 6 percent in Australia and 5.25 percent in Norway.
U.S. stock futures declined as the housing report spurred concern that the economic slump is worsening. Futures on the Standard & Poor's 500 Index expiring in December lost 1.4 percent after the S&P 500 rallied 4.2 percent yesterday.
Housing starts fell to an annual rate of 817,000 last month from 872,000 in August, the Commerce Department said today in Washington. The median forecast of 74 economists surveyed by Bloomberg News was for a drop to 872,000 from a previously reported 895,000.
The Reuters/University of Michigan preliminary estimate of October consumer sentiment probably fell to 65 this month from 70.3 at the end of September, according to the median forecast of 61 economists. The report is due at 10 a.m. New York time.
To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Kim-Mai Cutler in London at kcutler@bloomberg.net
