The dollar fell against the euro for a fourth day before data forecast to show U.S. existing home sales grew at a slower pace, adding to evidence the Federal Reserve will need to maintain stimulus for longer. The U.S. currency dropped against 14 of its 16 major counterparts after Goldman Sachs Group Inc. lowered its forecasts for the greenback, citing poor growth prospects for the world’s largest economy. New Zealand’s dollar rose after the government said its projected budget surplus in fiscal 2015 will be larger than forecast in December. “The U.S. is unlikely to exit monetary stimulus soon unless overall economic data show improvement,” said Minoru Shioiri, chief manager of Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo, a unit of Japan’s largest publicly traded bank by market value. “The dollar will probably struggle to rebound firmly.” The dollar dropped to $1.4266 per euro as of 6:40 a.m. in London from $1.4250 in New York yesterday. It fetched 81.66 yen from 81.68 yen. The yen fell to 116.52 per euro from 116.37. It earlier reached 116.70 per euro, the lowest level since May 11. U.S. sales of existing homes rose 2 percent to a 5.2 million annual pace in April after gaining 3.7 percent in March, according to the median forecast of economists surveyed by Bloomberg News before today’s report from the National Association of Realtors. Goldman’s Forecasts The greenback will fall to $1.45 per euro over three months from an earlier projection for it to trade at $1.40, Goldman Sachs said. It will decline to $1.50 in six months and $1.55 in 12 months, analysts led by London-based Thomas Stolper wrote in an e-mailed note dated yesterday. “For the dollar to stabilize or even to rally, investors need to be convinced of the case for additional long-term investments in the U.S.,” the analysts wrote. “With unemployment still high, fiscal consolidation looming and continued weakness in the real estate sector, the growth outlook remains less compelling in the U.S. than in many other regions or countries.” The Dollar Index, which tracks the dollar against the currencies of six major U.S. trading partners, declined 0.1 percent to 75.310. Minutes released yesterday of the Federal Open Market Committee’s last meeting showed policy makers preferred to reverse record monetary stimulus by ending reinvestment of asset proceeds before raising interest rates. Talks over the exit strategy don’t mean tightening “would necessarily begin soon,” the minutes said. Fed Minutes “The FOMC minutes didn’t give the U.S. dollar much support,” John Kyriakopoulos, Sydney-based head of currency strategy at National Australia Bank Ltd., wrote in a research note today. “Traders still don’t price a U.S. Fed rate hike until the end of the first quarter in 2012.” Fed policy makers have held the benchmark interest rate at a range of zero to 0.25 percent since December 2008. New Zealand’s operating surplus will be NZ$1.3 billion ($1 billion) in the year through June 2015 from a record NZ$16.7 billion deficit in the current period ending June 30, Finance Minister Bill English said in a budget released today in Wellington. The government said it will save NZ$5.2 billion over four years to spend on earthquake recovery and core services. ‘Tough Budget’ “We thought they were going to come up with a pretty tough budget, and it looks like that’s what they’ve delivered,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation’s biggest lender. “The markets responded positively.” New Zealand’s dollar rose to 79.14 U.S. cents from 78.91 cents and climbed 0.3 percent to 64.62 yen. Japan’s gross domestic product contracted an annualized 3.7 percent in the three months ended March 31, the Cabinet Office said today in Tokyo, showing the effect on the economy from a record earthquake and deadly tsunami on March 11. That puts the country into its third recession in a decade, with the Bank of Japan set to end a two-day policy meeting tomorrow. “People see few reasons to buy the yen as the earthquake weighs on the economy and growth and the BOJ is poised to move toward further policy easing,” said Kengo Suzuki, manager of the foreign bond department in Tokyo at Mizuho Securities Co. Japan’s key interest rate of zero to 0.1 percent compares with 1.25 percent in the euro area, 4.75 percent in Australia and 2.5 percent in New Zealand. To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

Source