Dollar Falls to Lowest in a Month Against Euro on Payroll Loss
The U.S. dollar index comparing the currency with its six primary peers fell to the lowest in 15 years as the payroll data raised speculation the housing slowdown and credit market turmoil are spilling into the broader economy. Interest-rate futures show traders are betting, with 76 percent certainty, the Federal Reserve will lower rates to 4.75 percent on Sept. 18.
``The things the Fed needs to justify two rate cuts this year are falling into place,'' said Robert Sinche, head of global currency strategy at Bank of America Corp. in
The dollar fell 0.6 percent to $1.3771 per euro at 10:46 a.m. in
U.S. Treasury Secretary Henry Paulson said the decline in
Euro and Dollar
The yen has gained 6.6 percent against the euro and 9 percent versus the dollar since Bear Stearns Cos. said on June 22 it would bail out a hedge fund that lost money on securities related to loans to homeowners struggling to make payments in the worst housing recession in 16 years.
Investors since then have fled the asset-backed money market and corporate debt while banks curbed lending, forcing global central banks, including the Fed and European Central Bank, to supply cash to ease the credit crunch.
``It's the first clearly recessionary signal out of the economy, and a sign that the subprime problems have crept into the real world,'' said Boris Schlossberg, senior currency strategist in
Payrolls Report
Non-farm payrolls decreased by 4,000 in August from a revised gain of 68,000 a month earlier, the Labor Department in
This week central banks from the U.K., the 13 country euro region, Canada, Australia and South Korea kept rates unchanged as they assess how the credit squeeze will affect economic growth.
Interest-rate futures show a 76 percent chance the Fed will cut borrowing costs to 4.75 percent from 5.25 percent at its Sept. 18 meeting. The odds of a reduction to 5 percent are 24 percent.
``It added significantly to the dollar-negative sentiment,'' said Alan Ruskin, head of international currency strategy in North America at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut. ``The Fed rate cut at this month's meeting is a lock. The question is whether the central bank will cut by 25 basis points or 50 basis points.''
The New York Board of Trade's dollar index fell earlier to 79.841, the lowest since September 1992.
Atlanta Fed President Dennis Lockhart said yesterday he hasn't seen ``conclusive'' signs of a housing spillover into the broader economy and warned that inflation has yet to be contained. St. Louis Fed President William Poole said it's not clear yet that the economy will ``nosedive'' and he's not sure of the right response to housing and financial turmoil.
109 Per Dollar
Barclays Capital Inc. strategist Toru Umemoto, the most accurate yen forecaster in 2006 according to a Bloomberg News survey, raised his forecast for the yen to 109 per dollar from a previous estimate of 114.
The pound rose 0.1 percent to $2.0267, rising for a third day versus the dollar, as the yield advantage of the two-year British note rose 7 basis points, or 0.07 percentage point, to 130 basis points over a comparable-maturity U.S. Treasury security.
European Central Bank policy makers signaled their intention to raise interest rates further to contain inflation once financial-market turbulence has abated.
