BLBG: Dollar Falls Against Euro on Speculation U.S. Outlook Worsens
The dollar declined against the euro and the pound on speculation the U.S. trade deficit widened in March and an economic recovery in the world’s biggest economy will be sluggish.
The dollar weakened against 12 of its 16 most-actively traded counterparts after a Chinese government report showed urban fixed-asset investment rose at the fastest pace in more than two years, spurring demand for higher-yielding assets. The euro gained as investors bet the European Central Bank will refrain from cutting interest rates further after reducing its benchmark rate to an all-time low last week, maintaining the allure of assets in the 16-nation region.
“The dollar is facing two major negative factors,” said Simon Derrick, London-based global head of currency strategy at Bank of New York Mellon Corp., the world’s largest custodian of financial assets. “There are clearly positive things that investors can grab hold of such as continued positive news from China. That gives them reasons to move into higher-yielding assets. At the same time, the dollar continues to be weighed down by the U.S. macro picture.”
The U.S. currency weakened to $1.3648 per euro as of 9:09 a.m. in London, from $1.3582 in New York yesterday, when it reached $1.3668, the lowest level since March 24. The euro bought 133.22 yen, from 132.40 yen.
Forecast Downgraded
The dollar fell for the second day in three against the pound as economists downgraded their projections for a recovery from the deepest U.S. recession in half a century, now seeing the jobless rate exceeding 8 percent through 2011, according to a Bloomberg News survey. General Motors Corp. said yesterday a bankruptcy filing by the automaker is more probable than previously thought.
The British currency advanced 0.6 percent to $1.5209.
ECB President Jean-Claude Trichet said yesterday policy makers see the first signs of an economic recovery.
“As far as growth is concerned, we’re around the inflection point in the cycle, that’s the sentiment,” Trichet said at a press conference at the Bank for International Settlements in Basel, Switzerland.
