The dollar fell to the weakest level against the euro in almost seven weeks as jobless claims rose last week to a one-month high, increasing speculation that the Federal Reserve will seek to stimulate economic growth.
The greenback declined earlier against the majority of its most-traded counterparts as Fed and China officials signaled they were prepared to ease monetary policy to expand economic growth. Europe’s shared currency rose against the yen before Germany and France hold debt-crisis talks in Berlin today. A separate report showed purchases of new U.S. homes rose more than projected in July to match a two-year high.
Jobless claims are “still OK, but I think generally the Fed yesterday set the bar really high for not doing quantitative easing,” Mary Nicola, a New York-based currency strategist at BNP Paribas SA, said in a telephone interview. “The real focus is what’s happening out of Europe, what’s happening out of the Federal Open Market Committee. Those are the keys things the markets are watching right now.”
The U.S. currency fell 0.1 percent to $1.2546 per euro at 10:04 a.m. New York time, after reaching $1.2572, the least since July 4. It was little changed at 78.56 yen. The euro was 0.1 percent stronger at 98.55 yen.
Jobless claims rose by 4,000 for a second week to reach 372,000 in the period ended Aug. 18, Labor Department figures showed today in Washington. The median forecast of 41 economists surveyed by Bloomberg called for 365,000. The four-week moving average, a less volatile measure, increased to 368,000.
Home sales climbed 3.6 percent to a 372,000 annual pace, following a 359,000 rate in June that was higher than previously estimated, figures from the Commerce Department showed today in Washington. The median estimate of 72 economists surveyed by Bloomberg called for a rise to 365,000. The rate was the same in May, which was the strongest since April 2010.
‘More Aggressive’
Minutes of the U.S. central bank’s latest policy meeting released yesterday showed officials remain supportive of more easing as unemployment has been mired at more than 8 percent since 2009.
There’s a 50 percent chance that the Fed will announce a form of quantitative easing at their September meeting, and it’s increasingly likely for the central bank to ease further later in 2012 or next year, Rick Rieder, chief investment officer of fundamental fixed-income at New York-based BlackRock Inc., the world’s largest money manager, said in an interview with Deirdre Bolton on Bloomberg Television’s “In The Loop.”
“Employment is going to take a very long time to get to the Fed’s mandate of full employment, which means they’re going to be on hold for a long time,” Rieder said. “Their comments yesterday were more aggressive than I think people would have thought.”
Chairman Ben S. Bernanke will have an opportunity to clarify his views in an Aug. 31 speech at a forum for central bankers in Jackson Hole, Wyoming, where he signaled a second round of bond buying by the Fed in 2010. Fed officials next meet on Sept. 12-13.
The U.S. central bank bought $2.3 trillion of mortgage and Treasury debt between 2008 and 2011 in two rounds of quantitative easing to cap borrowing costs. Policy makers have held the Fed’s key rate in a range of zero to 0.25 percent
A third round of asset purchases would “provide confidence to markets that we are intending to be accommodative for quite some time,” Chicago Fed President Charles Evans told reporters in Beijing today. More accommodative policies are needed around the world, from China to the U.S., he said.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the currency against those of six U.S. trading partners, dropped as much as 0.3 percent today to 81.284, the lowest since June 20.
China, Germany
The dollar has fallen 3 percent in the past month, the second-worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen posted the biggest decline, dropping 3.4 percent, while the euro climbed 0.8 percent.
People’s Bank of China Governor Zhou Xiaochuan said yesterday that adjustments to interest rates and banks’ reserve requirements are still possible after the central bank stepped up temporary cash injections this month.
German Chancellor Angela Merkel hosts French President Francois Hollande today as officials look for ways to stave off an immediate crisis as Greece prepares a report for international creditors on the health of its finances.
“Ongoing uncertainty regarding Greece and the periphery will cap medium-term gains” in the euro, strategists at Brown Brothers Harriman led by Marc Chandler wrote in a note to clients published today. “The dollar is trading softer in the aftermath of the FOMC minutes.”
New Zealand’s dollar appreciated against all but one of its major counterparts as Asian stocks gained. The so-called kiwi rose 0.2 percent to 81.58 U.S. cents and touched 81.87 U.S. cents, the highest since Aug. 7. The MSCI Asia Pacific Index of shares climbed 0.9 percent.
