Dollar in Longest Slump in 4 Months Before Fed Decision

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The dollar fell for a fourth day, the longest skid since July, as signs of an uneven U.S. economic recovery pushed back bets for interest-rate increases next year before the Federal Reserve sets monetary policy.

The U.S. currency touched a one-week low versus a basket of peers amid data yesterday that showed orders for durable goods unexpectedly fell. The Fed completes a two-day meeting after it said in September it would end quantitative easing this month if the economy keeps improving. Norway’s krone dropped on higher-than-forecast unemployment. Brazil’s real gained against all 16 of its major peers for a second day.

The Fed is “going to straddle the fence a bit more and continue to be data dependent for future policy moves,” Peter Gorra, head of foreign-exchange trading in New York at BNP Paribas SA, said in an interview. “They’ll give a little bit of meat to the hawks and a little bit of meat to the doves.”

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major counterparts, fell 0.1 percent to 1,061.86 at 1:06 p.m. New York time, after touching 1,060.74, the lowest level since Oct. 21. The losing skein is the longest since a five-day slump ended July 1.

The dollar dropped 0.1 percent to $1.2752 per euro after declining 0.7 percent in the previous three days. It was little changed at 108.16 yen. Japan’s currency slipped 0.1 percent to 137.91 per euro after reaching 138.03, the weakest since Oct. 1.

Krone, Real

The Norwegian krone dropped as retail sales shrank 0.1 percent in September from a 0.6 percent gain the previous month, data from Statistics Norway showed today. That compares with the median prediction of a 0.7 percent gain in a Bloomberg survey of economists. The jobless rate increased to 3.7 percent in August, from 3.4 percent the prior month, another report showed.

The krone slid 0.5 percent to 6.6476 versus the dollar after skidding as much as 0.8 percent, the most since Oct. 22. It reached 6.6787 on Oct. 16, the weakest in more than four years. It depreciated 0.7 percent to 8.4771 per euro.

The real traded at an almost two-week high on speculation President Dilma Rousseff will appoint an economic team that restores growth amid optimism the Fed keeps borrowing costs low.

The real climbed 0.7 percent to 2.4427 per dollar and touched 2.4248, the strongest level since Oct. 17.

Sweden’s krona rose after slumping yesterday to the weakest level in four years as the central bank cut the main interest rate to zero and delayed tightening plans as it fights deflation. Sweden’s currency appreciated 0.5 percent to 7.2971 per dollar after sliding to 7.3829 yesterday, the least since September 2010.

‘Flexible’ Fed

The greenback fell as bookings for goods meant to last at least three years decreased 1.3 percent after falling 18.3 percent in August, a U.S. Commerce Department report showed yesterday in Washington.

Prices as measured by the personal consumption expenditures index rose 1.5 percent from a year earlier in August, down from a 1.7 percent gain in May. The inflation gauge has fallen short of the Fed’s 2 percent target for 28 consecutive months.

“The Fed will want to be flexible because low inflation allows central banks not to be in a rush to raise interest rates,” said Roberto Mialich, a senior currency strategist at UniCredit Bank AG in Milan. “That is not something that will hurt the dollar. But if the Fed lets the market think more quantitative easing is possible, that will be dollar negative.”

Rate Bets

Bloomberg’s dollar index is down 0.9 percent since Sept. 30, set for the first losing month since June, as traders cut bets on an early Fed rate increase. The odds of borrowing costs going up by October 2015 are at 51 percent, from 85 percent on Sept. 30.

Policy makers have kept their key rate at zero to 0.25 percent since December 2008. They have reduced the bond-buying program to $15 billion a month from the original $85 billion.

“The end of QE is all but certain, but the question is how the Fed views the mixed economic data,” said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “If the statement retains the phrase that rates will stay low for a ‘considerable time,’ the immediate reaction may be to sell the dollar.”

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