Dollar weakens to two-year low amid concern on Fed


The dollar slid 1.3% in the past month, making it the second-worst performer, after the Canadian dollar, among 10 developed-nation currencies tracked by Bloomberg Correlation- Weighted Indexes. The euro strengthened 1.4%, while the yen advanced 0.3%.

“While the Fed’s on hold and still pumping liquidity in, the dollar’s going to be soft against everything,” said Jeremy Hale, head of macro strategy at Citigroup Inc. in London. “There’s a feeling that the debacle in Congress damaged the economy a little bit.”

An index based on a survey of purchasing managers in the euro-area manufacturing and services industry dropped to 51.5 from 52.2 in September, London-based Markit Economics said. That’s below the median forecast of 52.4 in a Bloomberg News survey of economists. A reading above 50 indicates expansion.

The index for services in Germany declined to 52.3 from 53.7, while the French gauge fell to 50.2 from 51, separate reports showed.

‘Wake-Up Call’

“This data is a wake-up call, showing that there are events that can still knock the euro,” said Jane Foley, a senior currency strategist at Rabobank International in London. “We’ve seen the euro push higher on the back of dollar weakness and the dollar will remain on the back foot, so the fall in the euro will probably be limited.”

Norway’s krone climbed to the highest in a month versus the dollar after the nation’s central bank said the currency has weakened since policy makers last met.

“The krone has depreciated,” Governor Oeystein Olsen said in a statement on the central bank’s website. “In other respects, economic developments both in Norway and abroad have been broadly in line with expectations. The key policy rate has therefore been kept unchanged.”

‘Quite Balanced’

The Oslo-based central bank left its key deposit rate at 1.5%. After appreciating against the euro in 2011 and 2012, the krone lost 11% this year following warnings from the central bank that it’s ready to act to stem gains.

The krone “has overshot the fundamentals to the downside in our view,” said Alvin Tan, a director of foreign-exchange strategy at Societe Generale SA in London. “The statement is quite balanced. The krone appears to be rising moderately.”

The krone appreciated 0.3% to 8.1342 per euro and advanced 0.5% to 5.8895 per dollar. It reached 5.8797 to the greenback, the strongest since Sept. 20.

Societe Generale recommends buying the krone against the euro and betting on an advance to 7.85 by year-end, Tan said. The krone last traded at that level on Sept. 19, according to data compiled by Bloomberg.

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