Dollar heads for weekly drop before Fed considers stimulus taper

Krona Weakness

The krona slid for the first time in six days against the euro as Statistics Sweden said gross domestic product shrank a quarterly 0.2% in the three months through June, revised from a 0.1% drop. The economy grew 0.1% from a year earlier, down from an estimate of 0.6% released in July.

The krona fell 0.6% to 8.7265 per euro, and slipped 0.8% to 6.5713 per dollar.

Norway’s krone weakened after a regional network report showed growth slowed over the past three months. The krone dropped 0.8% to 7.8852 per euro, and declined 0.8% to 5.9306 per dollar.

Trading in over-the-counter foreign-exchange options totaled $13.6 billion, compared with $18 billion yesterday, according to data reported by U.S. banks to the Depository Trust Clearing Corp. and tracked by Bloomberg. Volume in options on the euro-dollar exchange rate amounted to $3 billion, the largest share of trades at 22%. Options on the dollar-yen rate totaled $2.6 billion, or 19%.

Options Trade

Euro-dollar options trading was 104% more than the average for the past five Thursdays at a similar time in the day, according to Bloomberg analysis. dollar-yen options trading was about average.

Retail sales rose 0.2% in August, the smallest gain in four months and followed a revised 0.4% July gain that was bigger than previously estimated, the Commerce Department reported today in Washington. The median forecast of economists surveyed by Bloomberg called for a 0.5% advance. Sales excluding motor vehicles rose 0.1%.

Consumer confidence in the U.S. declined in September to the lowest level since April, indicating household spending may take time to pick up. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment this month fell to 76.8 from August’s 82.1. Economists in a Bloomberg survey called for 82, according to the median projection.

“The weaker-than-expected report may have increased the possibility that the Fed either reduces the total amount or potentially delays the time it expects to begin reducing asset purchases,” Brian Daingerfield, a Stamford, Connecticut-based currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit, said by phone. “They’re tempering their views on tapering, you might say.”

Fed Policy

The Fed will slow its monthly asset purchases to $75 billion from $85 billion at its next meeting on Sept. 17-18, according to a Bloomberg survey of economists on Sept. 6. Policy makers have pledged to keep their benchmark interest rate near zero at least as long as unemployment exceeds 6.5% and the outlook for inflation is no more than 2.5%.

President Barack Obama hasn’t made a decision on whom to nominate as Fed chairman, White House spokeswoman Amy Brundage said via Twitter. Nikkei reported Obama was set to name Larry Summers as Fed chairman, Lael Brainard likely to be named vice chairman.

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