BLBG: Dollar Rises Vs. Euro, Yen on Bets Fed Asset Purchases May Be Gradual
The Dollar Index posted its first two-day gain in more than a month amid speculation the Federal Reserve may gradually expand monetary-easing measures, slowing the depreciation of the currency.
The gains put the index on course for its first weekly gain in six. Federal Reserve Bank of St. Louis President James Bullard said the size of asset purchases should be based on economic conditions, starting with $100 billion next month. The euro declined as Treasury Secretary Timothy F. Geithner said nations with persistent trade surpluses should use policy tools including exchange rates to reduce those imbalances.
“Some of the dollar weakness is beginning to look overdone,” said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. “The size of this quantitative-easing package from the Fed might have been a bit overestimated and it’s possible the Fed might temper the size of QE in order to exert a degree of control over the dollar. Nobody wants to look like a culprit for widening global imbalances.”
The Dollar Index, which IntercontinentalExchange Inc. uses to track the dollar against the currencies of six major U.S. trading partners including the euro, yen, pound and Canadian dollar, rose 0.3 percent to 77.645, extending its gain for the week to 0.8 percent.
The dollar strengthened to $1.3882 per euro as of 9:43 a.m. in London from $1.3920 in New York yesterday. It was little changed at 81.27 yen from 81.33 yen. The euro bought 112.84 yen from 113.22 yen.
Geithner said in a letter obtained by Bloomberg News that countries should not use their currencies to win competitive advantages. In the letter to his G-20 counterparts, Geithner said officials “should commit to undertake policies consistent with reducing external imbalances below a specified share of GDP over the next few years.”
To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.
