Sept. 20 (Bloomberg) -- The dollar fell toward a five-week low against the euro before a report forecast to show confidence among U.S. homebuilders stayed at almost a 17-month low, adding to evidence the economic recovery is losing momentum.
The greenback dropped following a weekly decline as traders speculated the Federal Open Market Committee will say after a meeting tomorrow that it’s considering further measures to keep borrowing costs low. The pound fell against all of its most-traded counterparts as home sellers in England and Wales lowered asking prices.
“We need to see how the housing data drops out,” said Jeremy Stretch, global head of foreign-exchange strategy at Canadian Imperial Bank of Commerce’s CIBC World Markets unit in London. “It’s also all about the FOMC and whether the market perceives that the Fed is going to get out the big guns again and look at additional easing.”
The dollar depreciated 0.4 percent to $1.3099 per euro at 7:24 a.m. in New York, from $1.3050 on Sept. 17, when it slid to $1.3159, the weakest level since Aug. 11. The U.S. currency fell 0.2 percent to 85.67 yen, from 85.86. The yen was at 112.22 per euro, compared with 112.06 at the end of last week.
The National Association of Home Builders/Wells Fargo confidence index in the U.S. was at 14 this month, compared with 13 in August, according to the median forecast of 42 economists in a Bloomberg News survey. The reading has stayed below 50, meaning most respondents say conditions are poor, since April 2006. The August reading was the lowest since March 2009.
The Federal Reserve is likely to affirm its pledge to keep interest rates low for an “extended period” and maintain the floor on its holdings of securities, according to economists surveyed by Bloomberg.
The FOMC will hold off at its meeting tomorrow from expanding its balance sheet by purchasing securities, according to 60 of 64 analysts surveyed Sept. 16-17. Fifty-four of 63 economists said the Fed will leave unchanged a sentence in its statement saying high unemployment and low inflation warrant “exceptionally low” rates for an “extended period.”
The Dollar Index, which tracks the greenback against currencies of six major U.S. trading partners, dropped 0.3 percent to 81.195. The gauge touched 80.865 on Sept. 17, the lowest level since Aug. 10, when the Fed said it would resume buying Treasuries to keep its holdings in the System Open Market Account at about $2 trillion.
Fed Growth Outlook
The central bank “may have to revise its growth projections lower, and if it does, markets will speculate that the next meeting on will see the Fed launching” more easing, analysts led by Hans-Guenter Redeker, London-based global head of currency strategy at BNP Paribas SA, wrote in a research note today. The housing data “should not bode well for the dollar either,” they wrote.
Sweden’s krona appreciated 0.3 percent to 9.2018 against the euro after Prime Minister Fredrik Reinfeldt won a second term. The currency earlier slumped to 9.2610, the weakest since Sept. 9. The krona gained 0.6 percent to 7.0275 per dollar.
Sweden’s opposition leader, Mona Sahlin, conceded defeat in the election yesterday after her three-party bloc failed to win more votes than the government.
Sterling slid 0.5 percent to 83.90 pence per euro and decreased 0.1 percent to $1.5611 on evidence of weakness in Britain’s housing market.
Home sellers’ average asking prices in England and Wales decreased 1.1 percent in September from the previous month, Rightmove Plc, the operator of Britain’s biggest property website, said in a report today, adding to concern the economy may slip back into a recession.
Moody’s on U.K.
The U.K. will be able to meet its economic challenges and maintain its Aaa credit rating, Moody’s Investors Service said today in a statement. The assessment supports the government’s approach to reducing its budget deficit, the U.K.’s Treasury said in a separate statement.
Australia’s dollar climbed against its U.S. counterpart after Reserve Bank Governor Glenn Stevens signaled policy makers may need to resume raising interest rates as a mining boom stokes the economy. His comments spurred traders to raise bets he will increase rates at the central bank’s next meeting.
Australia’s dollar, this quarter’s best-performing major currency against the dollar, is now the most overvalued, according to data compiled by Bloomberg. Purchasing power parity, a measure of the cost of goods relative to other countries, shows the Aussie is 27 percent too expensive.
The Aussie appreciated 0.9 percent to 94.47 U.S. cents after reaching 94.69 cents, matching the strongest level since July 2008.
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