Dollar Declines as Bernanke Signals Growth to Slow on Housing


The dollar weakened against 11 of the 16 most-traded currencies after Federal Reserve Chairman Ben S. Bernanke said in a speech that mortgage delinquencies will weigh on U.S. economic growth.

The currency may decline for a second day against the euro and yen after Fed data showed yesterday that its seven interest rate cuts since September haven't made it cheaper to borrow money. The Australian dollar traded near a 24-year high on speculation the country's central bank will keep borrowing costs at a 12-year high today to curb inflation.

The dollar traded at $1.5519 per euro at 9:32 a.m. in Tokyo from $1.5496 late yesterday. It reached a record low of $1.6019 on April 22. The U.S. currency was little changed at 104.85 yen, following a 0.5 percent drop yesterday. The euro was at 162.72 yen from 162.46. The dollar may fall to $1.56 per euro in the next few days, Grace forecast.

Bernanke said rising mortgage foreclosures may push home prices down further, hurting the broader economy and threatening the financial system, in a speech to a Columbia Business School dinner. He also said lenders should forgive portions of mortgages and backed the idea of a federal agency refinancing troubled home loans.

The Fed lowered rates by a quarter percentage point to 2 percent on April 30. The dollar has fallen almost 10 percent against the euro and yen since Sept. 18 when the Fed began cutting borrowing costs from 5.25 percent.

A quarterly Fed survey showed yesterday a net 70 percent of U.S. banks increased loan rates over their cost of funds for commercial and industrial borrowing. That compares with 45 percent in the January survey, the Fed said.

The euro may extend its gain versus the dollar on speculation the European Central Bank will hold its main refinancing rate at a six-year high this week to control inflation.


TradingEconomics.com, Bloomberg
5/5/2008 7:40:11 PM