Dollar Drops Most in 2 Weeks on Signs Economy Is Losing Momentum

The dollar dropped the most in almost two weeks on concern the U.S. economy, one of the strongest among developed countries, has lost traction this year.

The greenback fell against all of its major peers as reports on housing starts and jobless claims were weaker than projected, adding to below-forecast readings for American factories, payrolls and retail sales. The dollar’s decline was the most pronounced against so-called commodity currencies, including the Swedish krona and Australia’s dollar.

“The market has been recognizing that first quarter is slower than the fourth,” said Robert Lynch, a currency strategist at HSBC Holdings Plc in New York. “In recent weeks, it has stalled the dollar rally.”

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, fell 0.7 percent to 1,186.07 at 5 p.m. New York time. The decline was the largest on a closing basis since April 3. The index is up 4.9 percent this year, after gaining 11 percent in 2014.

The dollar slumped 1.6 percent against the krona and the Aussie on signs the economies of commodities-producing nations are firming. Australia added twice as many jobs last month as analysts forecast. The dollar dropped 0.7 percent to $1.0761 per euro and fell 0.1 percent to 119.02 yen.

Fed Watch

In the U.S., investors are questioning whether the Federal Reserve will be able to start raising interest rates this year. Fed officials are divided about the timing, with Vice Chairman Stanley Fischer saying they can’t keep interest rates at record low forever, while Atlanta President Dennis Lockhart said he wanted to see both falling unemployment and rising inflation prior to the first rate increase.

Economists forecast the U.S. growth will accelerate to 2.9 percent this year, the best performance among Group of 10 nations after New Zealand, according to a Bloomberg survey.

“The numbers aren’t bad, just not as good as people expected,” Marc Chandler, global head of currency strategies at Brown Brothers Harriman & Co. in New York, said by phone. “Everyone knows Q1 is weak, by which I mean it’s flat. This has happened in the past five years. The dollar’s being pushed down, and then it’ll come right back.”

Strategists expect the dollar’s gains in the coming months will be muted compared with the most recent quarters. The greenback will rise 3 percent to $1.04 against the euro by the end of the year, compared with a 14 percent surge in 2014. Gains versus the yen will be limited to 5 percent, after more than 10 percent gains in each of the past three years.

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