The euro weakened from almost a seven-week high before the European Central Bank is forecast to refrain from adding additional monetary stimulus at a meeting tomorrow. The U.S. currency strengthened as Yellen told a congressional panel that data show “solid growth” for the economy in the second quarter, bolstering the case for a faster expansion this year. The New Zealand dollar slid versus all 16 of its major peers after Reserve Bank Governor Graeme Wheeler said the central bank may consider selling the currency if it fails to respond to worsening fundamentals.
“Although the dollar is marginally stronger, I do still think the downtrend for the dollar is intact,” Lennon Sweeting, a dealer in San Francisco at the broker and payment provider USForex Inc., said in a phone interview. “We’re on a slow boat to seeing normalized rates.”
The Bloomberg Dollar Spot Index, which monitors the greenback against 10 major counterparts, gained 0.1 percent to 1,003.50 at 5 p.m. in New York. It fell yesterday to 1,002.02, its lowest level since Oct. 29.
The euro fell 0.1 percent to $1.3910, after climbing to $1.3951 yesterday, the highest since March 13. The common currency was little changed at 141.75 yen. The dollar gained 0.2 percent to 101.90 yen, after touching three-week low.
Brazil’s real advanced the most among major currencies as Yellen made it clear she believes the U.S. economy still requires stimulus, signaling continued demand for emerging-market assets.
The real gained 0.6 percent to 2.2167 per U.S. dollar.
Yellen appeared before the Joint Economic Committee and is scheduled speak tomorrow to the Senate Budget Committee.
“A high degree of monetary accommodation remains warranted,” Yellen said in prepared testimony. “Many Americans who want a job are still unemployed,” and inflation is below the central bank’s 2 percent target, she said.
The Fed said April 30 it will keep the benchmark interest rate close to zero for a “considerable time” after its bond-buying program ends.
It reduced monthly debt purchases to $45 billion, its fourth straight $10 billion cut, and said further reductions in “measured steps” are likely. At that pace, the stimulus program intended to push down borrowing costs for companies and consumers would end in December.
“The Fed remains noncommittal in terms of raising rates or changing monetary policy right now,” Sireen Harajli, a strategist at Mizuho Bank Ltd. in New York, said in a phone interview. “Yellen is communicating that very clearly.”
The kiwi dropped from close to its highest in almost three years against the greenback reached yesterday as whole-milk powder prices declined for a sixth straight auction.
“If the currency remains high in the face of worsening fundamentals, such as a continued weakening in export prices, it would become more opportune for the Reserve Bank to intervene in the currency market to sell New Zealand dollars,” Wheeler said in notes for a speech.
The kiwi fell 0.9 percent to 86.61 U.S. cents after yesterday rising to 87.80, the highest level since August 2011.
“Today’s comments, and the dairy auction results, should keep the New Zealand dollar under some pressure,” said James McIntyre, a senior economist in Sydney at Commonwealth Bank of Australia. “The likelihood of the RBNZ intervening is quite low, and as we have seen in the past it has had limited lasting impact on the New Zealand dollar.”
ECB policy makers will retain a record low 0.25 percent rate target, according to the median estimate of economists in a Bloomberg survey. ECB President Mario Draghi stepped up his war of words against the euro’s gains in recent months, culminating in an April 24 pledge to start asset purchases if a stronger currency keeps inflation depressed.
“People are waiting on the ECB tomorrow,” Brad Bechtel, managing director at Faros Trading LLC in Stamford, Connecticut, said in a phone interview. “We’re probably going to test $1.40 to see what’s there. There’s scope to go a lot higher.”
The shared currency has gained 5.7 percent in the past 12 months, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The yen dropped 3.8 percent and the dollar fell 0.7 percent.
The pound reached the strongest level in nine weeks against the euro before the Bank of England announces its monetary policy decision tomorrow.
The currency was little changed at 82.05 pence per euro after appreciating to 81.93 pence, the strongest level since Feb. 28. The U.K. currency dropped 0.1 percent to $1.6952, after advancing to $1.6996 yesterday, the strongest since Aug. 5, 2009.
To contact the reporter on this story: John Detrixhe in New York at email@example.com