Dollar Falls Most in 4 Weeks as Yellen Signals Unabated Stimulus

The dollar weakened the most in four weeks as Federal Reserve Chairman-nominee Janet Yellen told Congress that monetary stimulus was still needed to spur economic growth.

Japan’s currency tumbled for a third week as it broke the 100-per-dollar barrier for the first time since Sept. 11. The pound rallied to a four-year high versus the yen after the Bank of England signaled an interest-rate increase sooner than forecast. The greenback fell against the euro, wiping out last week’s gain that followed better-than-forecast U.S. employment data and an unexpected European Central Bank interest-rate cut. The Fed will release minutes of its last policy meeting Nov. 20.

“You’re still early in this dollar-rollover period,” 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. “It’s fair to say that if the market took Yellen’s perspective seriously, easier and aggressive for as long as it takes to get the job done, that the dollar would be rolling over more materially.”

The Bloomberg U.S. Dollar Index, which monitors the greenback against 10 major counterparts, fell 0.5 percent to 1,016.88 this week in New York. It touched 1,015.83, the lowest since Nov. 7, and 1,025.01, the highest since Sept. 13.

The yen fell 1.2 percent to 100.19 per dollar after depreciating to 100.44, the weakest level since Sept. 11. Japan’s currency slid 0.5 percent to 135.21 per euro. The dollar fell 1 percent to $1.3496 per euro.

Winners, Losers

The Mexican peso rose 1.8 percent and South Africa’s rand climbed 1.7 percent this week, pacing gainers among the 16 most-traded currencies versus the dollar. The yen dropped 1.1 percent for the biggest decline, followed by the Swedish krona’s 0.9 percent slide.

The Czech koruna fell for a third week versus the euro as minutes from the central bank’s last monetary meeting showed policy makers clashed over the need for currency interventions, with the threat of deflation forcing the central bank to begin its first koruna sales in 11 years on Nov. 7. The currency fell 4.6 percent that day, the biggest-ever intraday drop.

The koruna slipped 0.7 percent this week to 27.168 per euro after dropping 4.3 percent last week.

Mexico’s peso had its biggest weekly advance since July amid eased concern that the Fed will reduce the stimulus that has bolstered demand for the country’s securities.

The currency appreciated rose to 12.9346 per dollar and touched 12.9287, the strongest this month.

U.K. Recovery

The pound strengthened as the central bank said in its quarterly inflation report that the jobless rate is more likely than not to fall to the 7 percent threshold that will lead it to consider raising borrowing costs in the third quarter of 2015. It previously predicted that would happen in the second quarter of 2016.

Governor Mark Carney said Britain has “one of the strongest recoveries in the advanced world,” while BOE policy maker Martin Weale said the U.K. economy may pick up faster than officials predict.

“We have seen such a strong move in the pound this week,” said Ulrich Leuchtmann, head of currency strategy at Commerzbank AG in Frankfurt. “The strength is justified by the improvement in the economic performance and I think over the medium term, it can continue.”

The pound climbed 1.8 percent this week to 161.49 yen and touched 161.65, the highest since August 2009. Sterling added 0.6 percent to $1.6118 after reaching $1.6135, the highest level since Oct. 29.

Yellen ‘Reputation’

Yellen at her Nov.14 congressional hearing indicated she’ll press on with the central bank’s unprecedented monetary stimulus until she sees a robust recovery, downplaying risks the policy is inflating asset bubbles.

Economists forecast the Fed will delay tapering asset purchases until March even after a report showed employers added more jobs than forecast in October.

“She pretty much lived up to her reputation,” said Eimear Daly, a currency-market analyst at Monex Europe Ltd. Daly said she expects U.S. the Fed will reduce asset purchases in December.

Policy makers will pare the monthly pace of bond buying to $70 billion at their March 18-19 meeting from the current pace of $85 billion, according to the median of 32 economist estimates in a Bloomberg News survey on Nov. 8. The median forecast in an Oct. 17-18 survey of 40 economists also called for a reduction to $70 billion in March.

ECB Easing

Peter Praet, an ECB executive board member, said Nov. 14 that the central bank’s policy debate was on timing for an interest-rate reduction and that there was “strong agreement on the assessment” of its policy. He said more measures are available, if needed. ECB President Mario Draghi cut the euro zone’s main refinancing rate to a record-low 0.25 percent on Nov. 7.

“The ECB is at the start of a new phase of easing, which will last many months,” Kit Juckes, global strategist at Societe Generale SA, wrote Nov. 14 in an e-mail. “That will contrast with the Fed tip-toeing in the other direction.”

The common currency may weaken toward $1.30 in coming weeks, Juckes said.

Futures traders increased their bets that the yen will decline against the U.S. dollar to the most since May, figures from the Washington-based Commodity Futures Trading Commission show.

The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen compared with those on a gain -- so-called net shorts -- was 95,107 on Nov. 12, compared with net shorts of 73,792 a week earlier.

The euro gained 6.3 percent this year, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen weakened 12 percent to lead decliners, while the dollar advanced 3.6 percent.

To contact the reporter on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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