Dollar Declines Against Euro, Yen

The dollar fell from close to a two- week high against the euro and traded at the lowest level in a week versus the yen on concern credit-market losses will widen, delaying any recovery in U.S. economic growth.

The dollar weakened as Asian stocks slumped after Standard & Poor's lowered its debt rating on three of the biggest U.S. securities firms and the Wall Street Journal reported Lehman Brothers Holdings Inc. may need to raise as much as $4 billion of extra capital to bolster its balance sheet. The yen advanced versus the British pound and the South African rand as investors pared so-called carry trades.

The dollar fell to $1.5594 per euro by 7:09 a.m. in New York, from $1.5537 yesterday. It declined to 104.29 yen, from 104.43 yen. The euro advanced to 162.63 yen, from 162.26. The dollar may trade as low as $1.57 per euro this week, Mekelburg said.

Lehman, the fourth-biggest U.S. securities firm, probably will post a second-quarter loss of 50 cents to 75 cents a share, according to analysts at Oppenheimer & Co. and Bank of America Corp. Lehman holds ``very large, illiquid'' assets, and ``we can't rule out equity issuance'' to replenish the balance sheet, analysts at Merrill Lynch wrote yesterday.

The Dollar Index traded on ICE futures in New York, which tracks the currency against those of six trading partners, fell 0.3 percent to 72.698, the lowest since May 29.

The cost of protecting European corporate bonds from default rose, according to traders of credit-default swaps. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings increased 7 basis points to 477 today, according to JPMorgan Chase & Co.

The dollar also fell before a government report today that will probably show weakness in U.S. manufacturing, giving the Federal Reserve less cause to raise interest rates.

U.S. factory orders fell 0.1 percent in April, after rising 1.3 percent the previous month, according to economists surveyed by Bloomberg. The Commerce Department is scheduled to release the data at 10 a.m. in Washington.

Dollar Declines Against Euro, Yen, Bloomberg
6/3/2008 7:03:05 AM