BLBG:Dollar Falls to 2-Year Low Before Confidence Data; Kiwi Declines
The dollar slid to a two-year low versus the euro before data economists said will confirm U.S. consumer sentiment slid to a nine-month low, fueling speculation that the Federal Reserve will delay cutting stimulus.
The greenback fell for a fourth day against the yen. U.S. policy makers, who meet next week, will delay tapering monthly bond purchases until March, according to a Bloomberg survey. New Zealand’s dollar weakened against all but one of its 16 major peers after the nation’s central bank governor said he is concerned higher interest rates would drive up the currency. The pound headed for a weekly gain versus the dollar before a report economists said will show U.K. growth accelerated.
“We are still seeing a gradual weakening of the dollar, reflecting people pushing back their expectations for the Fed tapering,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “Heading into year-end, given that the Fed looks unlikely to begin tapering this year, there’s some scope for further downside in the dollar.”
The dollar slid 0.1 percent to $1.3823 per euro at 8:55 a.m. in London after touching $1.3832, the weakest since November 2011. It sank 0.3 percent to 97.03 yen after reaching 96.94, the lowest level since Oct. 9. This week, the greenback is poised for a 1 percent drop against the euro and a 0.7 percent decline versus the yen.
Europe’s 17-nation currency lost 0.1 percent to 134.12 yen, trimming its weekly gain to 0.3 percent. The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major currencies, lost 0.1 percent to 999.95.
Slower Growth
The partial U.S. government shutdown that began Oct. 1 amid political deadlock over spending and the debt ceiling probably trimmed 0.25 percentage point from fourth-quarter economic growth and cost 120,000 jobs in October, President Barack Obama’s chief economic adviser said on Oct. 22.
The Thomson Reuters/University of Michigan consumer sentiment index fell to 75 this month, the lowest since January, and compared with 77.5 in September, according to the median economist estimate in a Bloomberg News survey before today’s data. A preliminary reading for October was 75.2.
The Fed will delay tapering its $85 billion of monthly bond purchases until March, according to economists surveyed by Bloomberg on Oct. 17-18. A poll last month forecast the first reduction would be in December. The central bank buys Treasuries and mortgage-backed securities to put downward pressure on long-term yields and spur growth, a move that tends to debase the greenback. The Fed’s next two policy meetings are scheduled for Oct. 29-30 and Dec. 17-18.
Fed Tapering
“We’re continuing to see the dollar get sold,” said Akira Moroga, a Tokyo-based manager of currency products at Aozora Bank Ltd. (8304) Regarding Fed stimulus “the consensus view is that December tapering is becoming less likely. The euro is supported as the economic picture there improves and investors seek an alternative to the dollar.”
The dollar has lost 1.3 percent in the past month, making it the worst performer after the Canadian dollar’s 2.6 percent drop among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro strengthened 1.1 percent, while the yen added 0.3 percent.
The New Zealand dollar weakened after central bank Governor Graeme Wheeler said in an interview with Radio New Zealand that increasing interest rates “would put upward pressure on the exchange rate and damage our traded goods sector.”
The kiwi lost 0.6 percent to 83.08 U.S. cents, extending its weekly drop to 2.3 percent.
The pound headed for a second weekly gain versus the dollar. U.K. gross domestic product expanded 0.8 percent in the third quarter compared with 0.7 percent in the previous three months, according to the median estimate of 40 economists in a Bloomberg News survey before the Office for National Statistics releases the data at 9:30 a.m. in London.
The pound was little changed at $1.6220, after rising to $1.6257 on Oct. 23, the highest since Oct. 1. It has gained 0.3 percent versus the U.S. currency this week. Sterling traded at 85.21 pence per euro.
To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
