Dollar Falls on Bernanke Rates Outlook; Euro-Yen at 4-Year High

The dollar fell versus the euro and the yen after Federal Reserve Chairman Ben S. Bernanke said the central bank’s main interest rate will probably remain near zero for a “considerable time” after asset purchases end.

The Bloomberg U.S. Dollar Index held a three-day drop after Bernanke said the Fed was committed to highly accommodative policies, echoing recent comments from other Fed officials including Janet Yellen, who has been nominated to succeed him. The euro touched a four-year high versus the yen before reports tomorrow forecast to show the region’s manufacturing growth accelerated. The yen declined briefly after Japan’s trade deficit was wider than economists had forecast.

“Bernanke and Yellen remain very consistent with each other that rates in the U.S. are going to remain low for a long time,” said Thomas Averill, a managing director in Sydney at Rochford Capital, a currency and rates risk-management company. “I do think the story is dollar weakness. I would say sell the U.S. dollar across the board.”

The dollar was little changed at $1.3543 per euro as of 6:54 a.m. in London after earlier reaching $1.3579, the weakest level since Nov. 1. The U.S. currency lost 0.1 percent to 100.07 yen. The euro was little changed at 135.52 yen after touching 135.95, the strongest since October 2009.

The Bloomberg U.S. Dollar Index, which monitors the greenback against 10 major peers, was little changed at 1,015.38 after touching 1,013.11 yesterday, the lowest since Nov. 6. The gauge weakened 0.4 percent over the previous three days.

Labor Improvement

The labor market has shown “meaningful improvement” since the Fed’s bond-buying program started, Bernanke said in remarks prepared for a speech to economists in Washington yesterday. A “preponderance of data” would be needed to begin removing accommodation, he said.

Benchmark interest rates may remain low “perhaps well after” the jobless rate falls below the Fed’s 6.5 percent threshold, he said.

In two hours of testimony before Congress last week, Yellen indicated she’ll press on with the Fed’s unprecedented stimulus until she sees a robust recovery. Bank of New York Fed President William C. Dudley said Nov. 18 he’s “getting more hopeful” about the economy while indicating no change in bond buying anytime soon.

The U.S. central bank buys $85 billion of Treasuries and mortgage-backed securities each month to put downward pressure on borrowing costs. Officials will pare the purchases to $70 billion a month at their March 18-19 meeting, according to the median economist estimate in a Bloomberg News survey on Nov. 8.

Retail Sales

The Commerce Department will probably say today that retail sales in the world’s biggest economy increased 0.1 percent in October after a 0.1 percent decline the previous month, according to the median estimate of economists surveyed by Bloomberg. A separate report is projected to show consumer prices stagnated in October from the previous month, after rising 0.2 percent in September.

Euro-area manufacturing growth probably accelerated to the fastest pace since June 2011, economists forecast in a Bloomberg survey before a Markit Economics report due tomorrow. An index based on a survey of purchasing managers in the manufacturing industry rose to 51.5 in November from 51.3 the previous month, while a services gauge climbed to 51.9 from 51.6, the poll predicts. A reading above 50 signals expansion.

European data “could provide a little bit of support for the euro,” said Joseph Capurso, a Sydney-based currency strategist at Commonwealth Bank of Australia, the nation’s biggest lender. “The message out of Europe will be that the economy’s gained momentum, but it’s still pretty weak.”

Little ‘Upside’

Europe’s common currency probably doesn’t have a “huge amount of upside,” according to Capurso, who recommends selling it above $1.3650, and said it may breach that level in coming weeks.

The euro has strengthened 0.7 percent in the past month, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The dollar has climbed 1.9 percent and the yen is down 0.8 percent.

European Central Bank President Mario Draghi and Chancellor Angela Merkel are scheduled to speak in Berlin tomorrow. ECB Executive Board member Joerg Asmussen said yesterday policy makers must be “very careful” about using negative interest rates to counter slow inflation. Officials cut the 17-nation region’s benchmark rate by a quarter-percentage point to 0.25 percent this month.

Japan Deficit

The yen briefly extended declines after data today showed growth in imports outstripped exports in October, leaving a trade deficit of 1.09 trillion yen ($10.9 billion), more than all 28 forecasts in a Bloomberg survey. Imports climbed 26.1 percent from a year earlier, while exports gained 18.6 percent.

“We expect the yen to weaken further, which should keep some upward pressure on the trade deficit,” Marcel Thieliant, a Singapore-based economist at Capital Economics, wrote in an e-mailed note to clients today.

Bank of Japan Governor Haruhiko Kuroda and his board gather for a two-day policy meeting starting today. Almost three-quarters of economists in a Bloomberg survey expect the BOJ will bolster stimulus in the first six months of 2014.

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