The dollar fell against most of its major counterparts on speculation Federal Reserve Chairman Ben S. Bernanke will tell a Senate panel economic stimulus will continue as bets rose that interest rates will go up elsewhere.
The yen and Swiss franc slumped as investors sought higher- yielding assets. The euro gained versus the dollar as the European Commission raised its growth forecast and said inflation may stay above the European Central Bank’s limit for most of 2011.
“It has become the market view that the ECB and Bank of England, and maybe the Bank of Canada, will raise rates before the Federal Reserve,” said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon Corp., the world’s largest custodial bank, with more than $20 trillion in assets under administration. “The data and events this week will be focused on fine-tuning the path of interest rates.”
The dollar weakened 0.1 percent to $1.3825 per euro at 9:19 a.m. in New York, from $1.3806 yesterday. The shared currency rose 0.6 percent to 113.60 versus the yen, from 112.91. Japan’s currency lost 0.5 percent to 82.18 per dollar, and the franc fell 0.4 percent to 1.2879 per euro.
The yen fell against all of its most traded counterparts.
Futures on the Standard & Poor’s 500 Index due this month rose 0.3 percent before a report that economists said will show manufacturing expanded at the fastest in almost seven years.
Bernanke Testimony
Bernanke is scheduled to deliver a semiannual report on monetary policy at 10 a.m. New York time to the Senate Banking Committee and is due to testify to the House Financial Services Committee tomorrow.
Gross domestic product in the euro region may increase 1.6 percent this year, above an earlier forecast of 1.5 percent growth, the Brussels-based commission said in a report published today. Inflation will average 2.2 percent, the agency forecast, up from a November estimate of 1.8 percent. Inflation in the 17- nation bloc quickened to 2.4 percent last month from 2.3 percent in January, the European Union’s statistics office in Luxembourg said today in a preliminary estimate.
“For the past couple of days we’ve seen some broader-based dollar weakness, especially against the G-10 currencies,” said Amelia Bourdeau, a currency strategist in Stamford, Connecticut, at UBS AG. “People expect the Fed to hike rates later compared to others in the G-10.”
The ECB has held its benchmark interest rate at 1 percent since May 2009.
Canadian Dollar
The Canadian dollar traded near the strongest level in more than three years as the Bank of Canada kept its benchmark interest rate at 1 percent and policy makers said they will carefully consider future increases in a recovery that is “slightly faster” than they forecast.
The currency traded at 97.28 cents per U.S. dollar, down 0.1 percent, after touching 96.84 cents, the strongest since November 2007.
The Swedish krona advanced 0.4 percent to 6.3014 against the dollar, after appreciating 1.6 percent yesterday. Versus the euro, it strengthened 0.3 percent to 8.7069. It has gained this year versus all of its 16 most-traded counterparts.
Sweden’s gross domestic product expanded 1.2 percent in the fourth quarter from 2.1 percent in the prior three months, Stockholm-based Statistics Sweden said today on its website. That compares with a 1 percent median estimate in a Bloomberg survey of 17 economists. Annual growth was at 7.3 percent, the fastest pace in at least 15 years.
The Institute for Supply Management’s U.S. manufacturing index rose to 61.0 in February, the highest since May 2004, economists in a Bloomberg survey forecast before today’s report.
Australian Dollar
Australia’s dollar gained for a third day against the Japanese currency, appreciating 0.4 percent to 83.65 yen as a government report showed retail sales gained 0.4 percent in January from a month earlier. That beat the 0.3 percent median forecast in a Bloomberg survey.
Japan’s benchmark interest rate of as low as zero compares with Australia’s 4.75 percent rate attracting investors to the South Pacific nation’s higher-yielding assets.
The euro completed a third monthly advance versus the dollar in February before the ECB holds its next policy meeting on March 3. ECB governing council member Mario Draghi said on Feb. 26 that inflation pressures are forcing policy makers to focus more on the timing of interest rate increases.
Europe’s shared currency has risen 1.3 percent this year, while the dollar has lost 2.2 percent, according to Bloomberg Correlation-Weighted Currency Indexes, which track the currencies of 10 developed nations. The dollar dropped yesterday to the lowest since August 2008, according to the indexes.
Source: Bloomberg By
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