• Fed's Tarullo doesn't see case for 2015 rates liftoff
  • U.S. currency held back as New Zealand dollar rebounds

The dollar slid to the weakest level in four weeks versus the euro as Federal Reserve officials argued for interest rates to stay on hold, while the currencies of nations reliant on commodity exports rebounded, dimming the greenback’s allure.

South Africa’s rand posted its biggest gain in almost a week after tumbling Tuesday by the most since early September. Fed Board of Governors member Daniel Tarullo told CNBC Tuesday that he doesn’t currently favor raising rates this year, lining him up with his colleague Lael Brainard, who also made the case for patience this week. The release of retail-sales data Wednesday may further clarify the likely direction of U.S. policy.

“Expectations of the Fed have been pushed back even further, and also it appears that the stabilization in emerging markets is proceeding, so we don’t see a follow-through of the selling that we saw yesterday,” said Alvin T. Tan, a foreign-exchange strategist at Societe Generale SA in London. “Market sentiment continues to be on the positive side for now, so the dollar longs continue to be shaved.”

A long position is a bet that a currency or asset will appreciate.

Kiwi Leads

The dollar sank 0.3 percent to $1.1412 per euro as of 7:10 a.m. in New York, after touching $1.1427, the weakest level since Sept. 18. The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 peers, declined 0.2 percent, also approaching a four-week low.

South Africa’s rand gained 0.9 percent, pulling back from its 1.8 percent drop on Tuesday. New Zealand’s dollar led gains among major currencies, climbing to its highest level in three months after the central bank signaled there are limits to how far it’s willing to go in cutting interest rates to stimulate the economy.

In the U.S., futures contracts indicate traders see a 34 percent chance the Fed will increase borrowing costs by December, down from 41 percent at the end of last month. The chances of a January move are also less than 50 percent. The calculations are based on the assumption the effective fed funds rate will average 0.375 percent after liftoff, versus the current range of zero to 0.25 percent.

U.S. retail sales rose 0.2 percent last month, matching August’s gain, economists surveyed by Bloomberg predicted before a Commerce Department report. Resilience in consumer spending has suggested Americans are looking beyond the recent volatility in financial markets and retaining their confidence in the economy.

That backs the argument that the world’s largest economy is ready for its first rate increase since 2006.

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