Dollar Declines as Central Banks Signal Looser Policy Is Working

  • RBA minutes damp speculation of further rate cuts this year
  • Euro gains after ECB's Noyer says bond-buying plan on track

The dollar fell against most of its major peers as officials from Europe to Australia signaled that their looser monetary policies are starting to work.

The statements encouraged speculation that policy makers will be less inclined to introduce new currency-sapping measures to stimulate their economies. The Bloomberg Dollar Spot Index approached an almost four-month low reached last week.

The euro climbed against its U.S. peer for the first time in four days after the European Central Bank’s Christian Noyer said its quantitative-easing plan represented the right amount of stimulus, while the Aussie dollar rallied from an almost one-week low as the Reserve Bank of Australia said interest-rate cuts and a weaker currency were supporting the economy. Sweden’s krona climbed as the former deputy governor of the Riksbank suggested monetary policy was on the right path.

“The RBA minutes last night indicated that chances for further immediate rate cuts are low,” while the “ECB’s Noyer indicated that he doesn’t see a reason to expand the QE program right now, which also helped to calm the markets,” said Esther Reichelt, a currency strategist at Commerzbank AG in Frankfurt. Also, “we’re seeing some general risk-on mood, which helps the Australian and New Zealand dollars in particular.”

Euro Gains

The euro climbed 0.5 percent to $1.1379 as of 6:12 a.m. New York time, rebounding from Monday’s 10-day low, while Australia’s dollar rose 0.6 percent to 72.88 U.S. cents, its first advance in three days. Sweden’s krona strengthened 0.3 percent to 8.2919 to the U.S. dollar and was little changed at 9.4217 per euro.

Bloomberg’s dollar index, which tracks the greenback against 10 major peers, dropped 0.2 percent, approaching the low set on Oct. 15. The statements from officials elsewhere pared the advantage the greenback has enjoyed as the Federal Reserve prepares to raise interest rates. New Zealand’s dollar was the biggest gainer versus the U.S. currency, climbing 0.6 percent to 68.29 U.S. cents.

The krona posted its first gain in four days after ex-Riksbank Deputy Governor Karolina Ekholm, now a top official at the Swedish Finance Ministry, said the unprecedented monetary stimulus by her former colleagues is starting to bear fruit in their fight to revive inflation.

The euro was also supported after the ECB said in a report that lending conditions largely continued to improve in the third quarter, spurred by its bond-purchase program and tighter competition among banks.

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