fOREX NEWS

Dollar Is Little Changed After Bank of America Beats Forecasts

July 21 (Bloomberg) -- The dollar was little changed against the yen after Bank of America Corp. said profit declined less than analysts estimated.

The yen touched the all-time low against the euro as the largest U.S. consumer and home lender became the fourth of the nation's five biggest banks to post better-than-estimated results. The pound dropped versus the dollar and the euro as a report showed U.K. house prices fell in July for the first time since data began in 2002.

``The world looks a little more peaceful for the time being,'' said Alan Ruskin, head of international currency strategy at RBS Greenwich Capital Markets in Greenwich, Connecticut. ``But longer-term concerns about the U.S. economy haven't diminished.''

The dollar traded at 106.96 yen at 10:06 a.m. in New York, unchanged from July 18. The U.S. currency was at $1.5850 per euro, compared with $1.5847. The yen traded at 169.54 per euro, compared with 169.49, and touched 169.91, the weakest level since the European currency debuted in 1999.

Bank of America's net income fell to $3.41 billion, or 72 cents a share, the Charlotte, North Carolina-based bank said today in a statement. The average estimate of 21 analysts surveyed by Bloomberg was 54 cents.

The bank added $2.2 billion to loan loss reserves. The world's biggest banks and brokerages have disclosed $447 billion of writedowns and losses because of a credit-market slump triggered by mortgage defaults.

JPMorgan & Chase Co., Citigroup Inc. and Wells Fargo & Co. reported second-quarter results last week that exceeded analysts' estimates.

Weaker Pound

The pound dropped for a second day, depreciating 0.3 percent to $1.9940 and 79.46 pence per euro. Rightmove Plc, Britain's most-used property Web site, reported that the average asking price for a home fell an annual 2 percent to 235,219 pounds ($469,544). Bank of England policy maker David Blanchflower told the Guardian newspaper that the British economy is entering a recession that may last more than a year and the bank must lower its 5 percent target lending rate.

``Given that the U.K. economy is going to grow below trend, why do we need tight policy in the U.K.?'' said Michael Metcalfe, head of macro strategy at State Street Global Markets in London. ``I would agree that the next move in U.K. rates will be downward and sterling will fall on the back of that.'' The pound may decline to $1.80 within a year, he said.

Australian Dollar

The Australian dollar rose as much as 0.7 percent to an eight-month high of 104.48 yen on speculation the nation will retain its interest-rate advantage over Japan. The difference in yield between two-year Australian and Japanese bonds widened to 5.85 percentage points, the most in a week. Australia's target lending rate of 7.25 percent compares with 0.5 percent in Japan.

South Korea's won dropped for a sixth day, decreasing 0.4 percent to 1,018.00 versus the dollar. A five-year rally in emerging-market currencies is coming to an end as central banks from South Korea to Turkey struggle to contain inflation, according to DWS Investments and Morgan Stanley.

Futures on the Chicago Board of Trade showed an 8 percent chance the Federal Reserve will increase its 2 percent target rate for overnight lending between banks by a quarter-percentage point at its Aug. 5 meeting, compared with 12 percent odds a week ago.

``The Fed has simply not been in a position to raise interest rates and fight inflation, so people have been shunning the dollar,'' said Neil Mellor, a currency strategist in London at Bank of New York Mellon Corp.

Stern on Rates

The U.S. central bank shouldn't wait for housing and financial markets to stabilize before raising rates, Minneapolis Fed President Gary Stern said in an interview July 18.

``We're pretty well-positioned for the downside risks we might encounter from here,'' he said. ``I worry a little bit more about the prospects for inflation.''

Sales of previously owned homes in the U.S. declined to a 4.94 million annual pace in June, from 4.99 million the prior month, according to the median forecast of 74 economists surveyed by Bloomberg News. The National Association of Realtors will release the report July 24.

A day later, the Commerce Department will say sales of new houses dropped to an annual pace of 503,000 from 512,000 in May, a separate survey shows. Sales of existing and new homes are down 35 percent from their July 2005 peak.

Leading economic indicators dropped 0.1 percent in June after a revised 0.2 percent decline the prior month, the Conference Board reported today. The decrease matched the median forecast of 62 economists surveyed by Bloomberg News.

Currency trading volume today may be about 75 percent of normal levels because of a public holiday in Japan, said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp., Australia's fourth-biggest lender.