Dollar Touches 15-Year Low on Bernanke; Aussie Reaches Parity
The dollar rose from an eight-month low against the euro and traded higher than a 15-year low versus the yen as technical indicators suggested the plunge in the greenback in the past six weeks may be hard to sustain.
The U.S. currency slumped earlier versus the euro and yen and slid to parity with the Australian dollar after Federal Reserve Chairman Ben S. Bernanke said additional monetary stimulus may be warranted because inflation is too low and unemployment is too high.
“He hasn’t really changed the outlook too much for Fed policy,” said Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange Inc., a currency brokerage. “A lot of this news is already priced in.”
The dollar rose for the first time in four days against the euro, gaining 0.8 percent to $1.3973 at 4:29 p.m. in New York, from $1.4084 yesterday. It slid earlier to $1.4159, the weakest level since Jan. 26. The dollar traded at 81.44 yen, compared with 81.48, after falling to 80.88, the weakest level since April 1995, when it reached the post-World War II low of 79.75 yen. The euro fell 0.9 percent to 113.79 yen, from 114.76.
The 14-day relative strength index of the euro against the dollar fell below 70 for the first time in 14 days. The readings higher than that level indicated that the euro may be poised for a drop after rallying more than 9 percent since the end of August. The relative strength index of the yen versus the dollar stayed above 70 for a sixth day.
Currency Report Delayed
The U.S. Treasury Department said it will delay a report on international currencies, including China’s yuan, while citing progress in the acceleration of the pace of the yuan’s rise.
The yuan advanced 0.4 percent this week and touched 6.6404, the strongest level since the central bank unified official and market exchange rates at the end of 1993.
The report will be delayed until after the meetings of the Group of 20 nations in the coming weeks, according to a statement from the Treasury.
Australia’s dollar touched $1.0004, trading stronger than the greenback for the first time since currency controls ended in 1983 before slipping 0.6 percent to 98.80 U.S. cents. The pound appreciated as much as 0.6 percent to $1.6107, the highest level since Jan. 29, before trading at $1.5982.
The Dollar Index, used by IntercontinentalExchange Inc. to track the greenback against currencies including the euro, yen and pound, gained 0.4 percent to 76.988 after touching 76.144, the lowest level since Dec. 11.
Weaker Dollar
The gauge of the greenback has dropped 4.3 percent since Sept. 21, when the Fed said in a statement following its policy meeting that it’s prepared “to provide additional accommodation if needed” to support the recovery.
Bernanke said today in remarks given at a Boston Fed conference that the central bank may expand asset purchases or change the language in its statement, while saying “nonconventional policies” have costs and limitations. “There would appear -- all else being equal -- to be a case for further action,” Bernanke said.
“Those words briefly helped to extend the dollar’s slide,” Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York, wrote in a note to clients. “Those initial market reactions have since reversed. It is an indication that further Federal Reserve purchases of U.S. Treasuries is already widely anticipated.”
Slower Inflation
The consumer price index rose 0.1 percent in September after 0.3 percent gains in the prior two months, the Labor Department reported. The median forecast of 79 economists in a Bloomberg News survey was for a 0.2 percent increase.
The U.S. currency had a fifth weekly decline versus the euro, matching a period of consecutive losses that ended Dec. 26, 2008, after the central bank cut the fed funds target to zero to 0.25 percent.
The dollar fell 0.2 percent versus the euro this week and had a fourth weekly drop against the yen, dipping 0.6 percent.
The greenback has tumbled 5 percent against the yen since Sept. 15, when Japan acknowledged intervening in the market by selling the currency to prevent its strength from undermining the nation’s export-dependent economy.
“Everybody is very cautious about a possible Bank of Japan intervention in the near term,” said Hidetoshi Yanagihara, a senior currency trader at Mizuho Financial Group Inc. in New York. “The market has been weak-dollar for a long time.”
To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
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