BLBG: Dollar Falls Versus Euro as Report May Show Home Sales Slumped
The dollar weakened for a second day against the euro before a government report that economists Forecast will show sales of new U.S. homes declined to the lowest level in more than 17 years.
South Korea’s won dropped the most in a month versus the U.S. currency and India’s rupee fell for a third day on concern the global economy will slow further, hurting demand for Asian exports. Britain’s pound slid for a second day against the euro as reports showed the economy shrank more than originally projected in the third quarter and mortgage-loan approvals slumped.
“The next couple of days are going to be data-driven, which is negative for the dollar,” said Brian Dolan, chief strategist at Forex.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey, in an interview on Bloomberg Television. “The data is going to be weak. The data is going to shine the spotlight on the dollar and send the dollar a limping out to end the year.”
The dollar slid 0.4 percent to $1.3994 per euro at 8:35 a.m. in New York from $1.3944 yesterday. It dropped to $1.4719 on Dec. 18, the weakest level since Sept. 25. The yen traded at 126.02 per euro following a 1.3 percent loss yesterday. It was at 90.06 per dollar, after reaching a 13-year high of 87.14 on Dec. 17.
Against the greenback, Korea’s won fell 2.1 percent to 1,337.25. India’s rupee declined 1.5 percent to 48.76. Russia’s ruble slid 0.2 percent versus the euro to 39.6967 and rose to 28.3829 against the dollar, a day after the central bank devalued the currency.
Housing Reports
Currency trading may be subdued today because of a public holiday in Japan, said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia Ltd., the nation’s biggest mortgage lender. Commonwealth Bank predicted the U.S. currency will fall to $1.4200 per euro by March 31, compared with its previous forecast of $1.1800.
U.S. new-home sales slid to an annual pace of 415,000 in November, the lowest level since January 1991, from 433,000 in October, according to a Bloomberg News survey. The Commerce Department releases the data at 10 a.m. in Washington.
The Federal Reserve cut the target rate for overnight loans to between zero and 0.25 percent from 1 percent on Dec. 16, and said it may keep rates low for “some time” while considering potential benefits of buying longer-term Treasury securities.
Fed Scare
“The recent dollar weakness had been driven by scares of the adoption of the quantitative easing approach by the Fed,” said Lee Hardman, a currency strategist in London at Bank of Tokyo-Mitsubishi Ltd. “The dollar’s decline is overdone and out of line with the economic fundamentals. There’s still a further leg higher for the dollar in the first half of next year.”
For the year, the dollar strengthened 4.1 percent against the euro, 34 percent versus the British pound and 28 percent against the Australian dollar as investors sold riskier assets and repay dollar-denominated loans.
The Japanese yen headed for its largest annual gain against the dollar in more than two decades amid speculation the credit crisis will deepen. HFA Holdings Ltd., an Australian hedge fund, said yesterday it halted redemptions from three funds. The yen advanced 24 percent against the dollar this year.
“Japan is not in the mood to invest offshore and we don’t blame them,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “We’re bullish on the yen in the short term.” The yen may strengthen to 85 against the dollar in a month, Callow forecast.
Exports Hurt
A stronger yen contributed to a record 27 percent drop in Japan’s exports in November from a year earlier, a Finance Ministry report showed yesterday. Toyota Motor Corp., the world’s second-largest automaker, yesterday forecast its first operating loss in 71 years on plunging sales and a surging yen.
“Dollar-yen around 90 really creates a problem with regards to Japan’s export market,” said Sharada Selvanathan, a currency strategist at BNP Paribas SA in Hong Kong. “I don’t think Japanese officials are going to be very happy with the level of dollar-yen.”
Bank of Japan Governor Masaaki Shirakawa said yesterday that a strong yen will have a negative effect on economic growth in the short term, and added that foreign-exchange rates are one important factor influencing the economy. Finance Minister Shoichi Nakagawa last week signaled Japan is ready to intervene in the currency market for the first time in four years.
The pound declined as the U.K.’s Office for National Statistics said the economy shrank 0.6 percent in the third quarter, the most since 1990. Mortgage lending dropped in November to the lowest in 14 years as tightening credit exacerbated the economic slump, the British Bankers’ Association said today.
The pound, which lost almost a quarter of its value against the currencies of the U.K.’s biggest trade partners this year, was at 94.42 pence per euro, from 93.98 pence yesterday, and $1.4821, from $1.4825.
