Dollar Declines on Durable Goods Before Fed; Krona Drops

The Bloomberg Dollar Spot Index fell for a third day after orders for U.S. durable goods unexpectedly declined as the Federal Open Market Committee started a two-day policy meeting.

The Swedish krona tumbled to its weakest level in four years as the central bank’s decision to cut its main interest rate to zero damped demand for the Nordic currency. Russia’s ruble plunged on speculation the nation will move closer to adopting a free float. Brazil’s real gained back all of yesterday’s slide and more. Traders have pushed back bets on when the Federal Open Market Committee will raise interest rates.

Durable goods “tends to be one of your leading indicators, so I think that’s probably where a good portion of the pressure’s coming from today,” said Jennifer Vail, head of fixed income at U.S. Bank Wealth Management in Minneapolis. “If the FOMC statement more than acknowledges the recent weakness in data, then I think that could put downward pressure on the dollar.”

Bloomberg’s Dollar Spot Index, which tracks the U.S. currency against 10 major counterparts, fell 0.3 percent to 1,063.15 at 5 p.m. New York time and has declined 0.6 percent in three days. It touched 1,062.65, the least since Oct. 21.

The dollar dropped 0.3 percent to $1.2734 per euro for a third straight decline. It rose 0.3 percent to 108.16 yen. Japan’s currency fell 0.6 percent to 137.73 per euro.

Ruble Float

The ruble fell for the fifth day on concern Russia will quicken its move to a free float after more than $20 billion of interventions this month failed to halt the depreciation.

Sanctions over the Ukraine conflict and dropping oil prices have exacerbated a dollar shortage, and the ruble’s decline is stoking speculation the central bank will decide to abandon interventions as early as Oct. 31, when policy makers meet to decide on interest rates, according to Sberbank CIB.

The currency weakened 0.6 percent to 47.6799 against the central bank’s target dollar-euro basket, bringing this year’s decline to 23 percent.

Australia’s dollar advanced for a third day, climbing 0.6 percent to 88.56 U.S. cents, as the country’s interest rates attract investors. The nation’s main interest rate is at 2.5 percent, compared with zero or near-zero rates in the U.S., euro area, Japan and Sweden.

Brazil’s real advanced against all of its 31 top peers, gaining 2.4 percent to 2.4610 per dollar after plunging 1.9 percent yesterday in the wake of Brazilian President Dilma Rousseff’s re-election.

‘Slash, Burn’

The krona slumped versus all of its 16 major peers as the Riksbank delayed tightening plans into 2016 in a bid to fight deflation.

“People were anticipating a fairly decisive action, but weren’t necessarily considering that they were going to go all the way to slash and burn and get us down to zero,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “That’s obviously the slight surprise.”

A weaker currency may improve the competitiveness of Sweden’s exports, which account for half the nation’s economy, and help tackle deflation. Swedish consumer prices tumbled 0.4 percent in September from a year earlier, an Oct. 14 report showed. At the same time, lower borrowing rates may add to the nation’s record consumer-debt burden

Sweden’s currency slid 0.5 percent to 7.3352 per dollar, after depreciating to 7.3829, the weakest level since September 2010. It declined 0.9 percent to 9.3408 against the euro after plunging as much as 1.3 percent, its biggest drop since July 3.

Durable Goods

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

While Bloomberg’s Dollar Spot Index has climbed 4.3 percent this year, it’s headed its first monthly drop since June as traders cut the probability the central bank will raise borrowing costs. The odds of rates going up by October 2015 are at 49 percent, from 85 percent on Sept. 30.

“There’s a question mark going into the FOMC tomorrow -- we have to see what hints the board gives on the outlook,” said Charles St-Arnaud, London-based senior economist at Nomura Securities International Inc.

The FOMC indicated at its September meeting that it planned to end its bond-purchase program this month. Policy makers have kept their key interest rate at zero to 0.25 percent since December 2008.

The dollar gained 6 percent this year, the best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen added 3 percent. The krona dropped 8.3 percent, the biggest decline, while the euro fell 2.6 percent.

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