Dollar declines as Fed report shows economy slowing

The dollar (NYBOT:DXZ13) extended a weekly decline as measures of business conditions and industrial production dropped, adding to bets the Federal Reserve won’t stop its monthly asset purchases anytime soon.

The yen extended a third weekly slide versus the dollar as gains in stocks and the outlook for further global economic stimulus trimmed demand for haven assets. The greenback headed for a weekly drop versus the euro after Federal Reserve Chairman-nominee Janet Yellen said yesterday the quantitative- easing program was needed to spur growth. Australia’s and New Zealand’s dollars strengthened.

“The currency market appears to be saying, ‘We get the message from Yellen, the Fed’s not going to taper,’” Jonathan Lewis, chief investment officer at Samson Capital Advisors LLC and manager of the Samson Strong Nations Currency Fund, said in a telephone interview from New York. “Monetary conditions are going to be easy for a very long period, and that’s particularly positive for currencies geared to growth and commodity cycle.”

The Bloomberg U.S. Dollar Index, which monitors the greenback against 10 major counterparts, fell to 0.2% to 1,017.01 at 9:41 a.m. in New York after dropping to 1,015.83 yesterday, the lowest since Nov. 7. It is down 0.5% this week.

The yen fell 0.1% to 100.15 per dollar after depreciating to 100.44, the weakest level since Sept. 11. It has lost 1.1% this week. Japan’s currency slid 0.4% to 135.11 per euro. The dollar fell 0.2% to $1.3490 per euro, set for a decline of 0.9% this week.

Winners, Losers

South Africa’s rand climbed 2% this week and the Mexican peso added 1.8%, the most among the 16 most- traded currencies versus the dollar. The yen dropped 1.1% for the biggest decline, followed by the Brazilian real’s 0.9% slide.

The Australian and New Zealand dollars rose today as optimism there will be further monetary stimulus from major central banks buoyed demand for higher-yielding assets.

“The central bank outlook will remain supportive in the near term,” said David Forrester, a senior vice president for Group of 10 foreign-exchange strategy at Macquarie Bank Ltd. in Sydney. “With the weaker yen, the Aussie and kiwi tend to outperform.”

The Australian dollar rose 0.7% to 93.81 yen, and gained 0.5% to 93.66 U.S. cents. New Zealand’s dollar rose 0.8% to 83.40 yen and strengthened 0.6% to 83.26 U.S. cents.

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