Dollar Falls to One-Month Low Versus Euro as Krone Slides

The dollar fell to a one-month low versus the euro as a gauge of U.S. business activity fell more than forecast, adding to evidence the recovery in the world’s largest economy is slowing.

The U.S. currency declined for a third month against the yen after closing last week below the 200-day moving average for only the second time since 2012. Norway’s krone fell to the weakest level in four months versus the euro as retail sales contracted more than economists forecast. Australia’s dollar recorded its longest run of monthly gains in four years before the Reserve Bank sets policy tomorrow. Volatility slid to a record low amid speculation the Federal Reserve will keep interest rates at almost zero even as it scales back monthly bond-buying.

“The dollar has been softer,” said Robert Lynch, a currency strategist at HSBC Holdings Plc in New York. “Even though the Fed is tapering, they’re still in easing mode and some of the higher-profile data has been seized upon by some people -- like the big down revision to GDP a week ago -- as a less-helpful development for the dollar.”

The greenback fell 0.3 percent against the euro to $1.3692 at 5 p.m. New York time. Japan’s currency dropped 0.2 percent at 138.74 versus the 18-nation euro.

The dollar fell 0.1 percent to 101.33 yen, after touching 101.24, the weakest level since May 21. It fell 0.4 percent since May 30.

Winners, Losers

New Zealand’s dollar has rallied 3.1 percent this month, the most of the greenback’s 16 major peers. The British pound has climbed 2.1 percent, while the Norwegian krone dropped 2.6 percent and the Mexican peso declined 0.9 percent.

This quarter, South Korea’s won rose 5.2 percent and Canada’s dollar added 3.6 percent. The Swedish krona depreciated 3.2 percent.

The real gained 6.7 percent against the dollar this year, while the krona is down 3.7 percent.

Official foreign-exchange reserves denominated in dollars, euro and yen rose in the first quarter, according to the International Monetary Fund. The U.S. currency accounted for 60.94 percent of allocated reserves, up from 60.90 percent in the past three months of 2013, the report showed. Euro holdings increased to 24.51 percent from 24.48 percent, while yen holdings rose to 3.98 percent from 3.85 percent.

Price Swings

The JPMorgan Global FX Volatility Index reached 5.48 percent, the lowest level on record according to data compiled by Bloomberg going back to 1992.

The dollar is “being driven by a combination of low yields and low volatility,” Adam Cole, the head of Group of 10 currency strategy at Royal Bank of Canada in London, said in a phone interview. “The dollar has been heavy for a few weeks now and it’s really a continuation of that trend.”

Canada’s dollar briefly fell from the strongest level since January after the nation’s economy grew less than forecast in April.

The nation’s economy grew 2.1 percent in April from a year earlier, matching a 2.1 percent gain the previous month, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg forecast a 2.3 percent expansion.

The loonie was little changed at C$1.0671 per U.S. dollar, after falling as much as 0.3 percent.

Dollar Declines

The greenback slipped against 13 of its 16 major peers this month after the Commerce Department said on June 25 U.S. gross domestic product shrank 2.9 percent in the first quarter, the most since 2009.

Treasury 10-year notes yielded 2.53 percent, almost the lowest level since June. 2.

“U.S. yields, particularly 10-year yields, have been drifting lower and that’s evidently saying something about the economy,” said Richard Franulovich, chief currency strategist for the northern hemisphere at Westpac Banking Corp. in New York. “The dollar’s taking its cue from that.”

The Institute for Supply Management-Chicago Inc.’s business barometer fell to 62.6 in June from 65.5 the prior month. The median forecast of 45 economists in a Bloomberg survey projected the index would fall to 63.

Fed Chair Janet Yellen said this month policy makers remained committed to low interest rates for a “considerable time” after ending a bond-purchase program they have used to spur growth. The central bank has held its benchmark rate target at zero to 0.25 percent since 2008, while trimming monthly bond-buying to $35 billion, on pace to end the program late this year.

Growth Outlook

The Norwegian krone slumped after a report showed retail sales fell 0.9 percent last month, exceeding the 0.3 percent drop predicted by analysts in a Bloomberg News survey. The Nordic currency depreciated 0.4 percent to 8.3974 per euro after touching 8.4195, the weakest level since Feb. 10.

Norway’s currency has fallen 2.3 percent in the past six months, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies, making it the worst performer after Sweden’s krona. The euro slid 2 percent and the yen gained 3 percent. The U.S. dollar weakened 1.1 percent.

The Australian dollar rose 0.1 percent today to 94.33 U.S cents. It’s advanced 1.3 percent in June, a fifth-straight month of gains, the longest streak since the period ended November 2009.

All 29 economists surveyed by Bloomberg expect the Reserve Bank of Australia to keep interest rates on hold at 2.5 percent tomorrow.

“All of the risks for the Aussie point to the downside,” said Daniel Been, a Sydney-based senior foreign-exchange strategist at Australia & New Zealand Banking Group Ltd. “The Aussie’s moves in the last month or so have been contrary to an RBA that has softened its neutral stance a little bit and contrary to commodity prices. This just adds risk that it’s all about the carry trade and the low volatility environment allowing people to ignore fundamentals.”

ANZ’s forecast is for the Aussie to trade at 87 cents by the end of the year, Been said.