BLBG:Dollar Falls as Minutes Show Fed Wants More Job Progress
The dollar fell to the lowest in almost three weeks against the euro after Federal Reserve Chairman Ben S. Bernanke said inflation and unemployment rates show the economy still requires monetary stimulus.
The U.S. currency declined versus all except one of its 16 major counterparts before a government report that economists said will show continuing claims for jobless benefits increased. The yen strengthened for a second day against the dollar after the Bank of Japan boosted its view of the economy at a policy meeting and refrained from adding monetary stimulus. The Australian dollar climbed to a two-week high.
Bernanke’s comments are “important for the near-term direction for the U.S. dollar,” said Andrew Salter, a foreign-exchange strategist at Australia & New Zealand Banking Group Ltd. (ANZ) in Sydney. “We’ll see good opportunities over the next couple of days to buy into dollar weakness.”
The dollar declined 0.5 percent to $1.3042 per euro as of 8:51 a.m. in London after depreciating to $1.3207, the weakest level since June 21. The U.S. currency dropped 0.5 percent to 99.14 yen after sliding to 98.27 yen, the lowest since June 27. The yen was little changed at 129.33 per euro.
ANZ predicts the dollar will weaken to $1.37 per euro by year-end, Salter said.
‘Highly Accommodative’
Bernanke called for maintaining accommodation yesterday even as the minutes of policy makers’ June 18-19 meeting showed them debating whether to stop bond buying in 2013.
“Highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy,” the Fed chairman said in response to a question after a speech in Cambridge, Massachusetts.
The Fed minutes released yesterday showed “many members indicated that further improvement in the outlook for the labor market would be required before it would be appropriate to slow the pace of asset purchases.” The Fed buys $85 billion of Treasuries and mortgage debt each month as part of its quantitative-easing program to cap borrowing costs, which tends to devalue the U.S. currency.
“It doesn’t probably change the bigger picture, which is favorable for the dollar,” Jonathan Webb, head of foreign-exchange strategy at Jefferies Bache Ltd., a unit of Jefferies International Ltd., said on Bloomberg Television’s “First Up” with Susan Li. “The bar for further QE is very high. It’s going to take very weak data to stop them from tapering.”
Dollar’s Decline
The dollar has dropped 0.7 percent in the past week, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro rose 0.4 percent and the yen gained 0.3 percent.
The Labor Department will say today the number of people continuing to receive jobless benefits rose to 2.96 million in week through June 29 from 2.93 million the previous week, according to a Bloomberg News survey. Initial claims fell to 340,000 last week from 343,000, a separate survey showed.
The yen rose against the dollar as the BOJ increased its assessment of the economy by referring to a recovery for the first time since before a record 2011 earthquake.
Policy makers stuck with a pledge to expand the monetary base by 60 trillion yen to 70 trillion yen per year and said the economy was starting to recover moderately.
“There is no need for additional BOJ stimulus because the economy is picking up,” said Marito Ueda, senior managing director at FX Prime Corp. (8711), a currency-margin company in Tokyo. “The BOJ decision was expected. It seems the market is overreacting a bit, with the yen being bought back.”
The Australian dollar gained for the third time in four days against the U.S. currency as a government report showed the economy unexpectedly added workers in June.
The number of people employed increased by 10,300 in June from May as full-time jobs declined by 4,400 and part-time employment increased by 14,800, the statistics bureau said in Sydney. The jobless rate climbed to 5.7 percent, the highest since September 2009.
The Aussie advanced 0.7 percent to 92.40 U.S. cents after rising to 93.06 cents, the strongest since June 27.
To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Lucy Meakin in London at lmeakin1@bloomberg.net.
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
