Dollar falls after data on Fed easing speculation; kiwi advances

June 14 (Bloomberg) -- The dollar fell for a second day against the yen after reports signaled a slowing U.S. economy, boosting the case for the Federal Reserve to take more steps to bolster growth.

The euro rose against the dollar on bets its 5 percent decline since April was overdone even as Spanish bond yields rose to a record after Moody’s Investors Service cut the nation’s credit rating. The U.S. currency declined versus 15 of its 16 major peers after initial jobless claims rose last week and inflation declined in May. New Zealand’s dollar strengthened as the central bank gave no indication it would cut interest rates.

“That jobless claims are higher than expected shows that we’ve reversed a lot of the good performance we’ve seen this year,” said David Mann, regional head of research for the Americas at Standard Chartered Plc in New York. “Potential action or further dovishness from the Fed next week could lead to the dollar heading lower.”

The dollar depreciated 0.3 percent to 79.26 yen at 10:10 a.m. in New York after falling 0.1 percent yesterday. The U.S. currency dropped 0.3 percent to $1.2599 versus the euro. The 17- nation currency added 0.1 percent to 99.87 yen.

South Africa’s rand fell by the most among the 16 major currencies tracked by Bloomberg. It lost 0.3 percent to 8.4205 per dollar.

Technical Issues

Hedge funds and other large speculators increased their bets on a drop in the euro against the dollar to a record high last week, Commodity Futures Trading Commission data showed June 8. Futures traders increased net euro short contracts to 214,418 in the week ended June 5, the figures showed.

The shared currency closed above its 20-day moving average, at $1.2543 yesterday, for the first time since May 1, a move that may be helping it gain today, Brown Brothers Harriman & Co. wrote in a note to clients.

“The situation in Europe poses significant risks to the U.S. financial system and economy and must be monitored closely,” Fed Chairman Ben S. Bernanke told lawmakers on June 7. “As always, the Federal Reserve remains prepared to take action as needed to protect the U.S. financial system and economy in the event that financial stresses escalate.”

The Fed bought $2.3 trillion of bonds in two rounds of so- called quantitative easing from 2008 through 2011 to stimulate growth through lower borrowing costs. The central bank meets June 19-20.

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