Dollar Falls to One-Week Low vs Euro


The dollar declined to a one-week low against the euro on speculation a central bank report today will show a deepening slump in manufacturing, encouraging the Federal Reserve to delay increasing borrowing costs.

The U.S. currency also held near a one-week low versus the Australian and New Zealand dollars on concern credit market losses and record oil prices will prolong a U.S. economic slowdown. The Swiss franc rose as the central bank will leave the main lending rate unchanged at a six-year high today, according to a Bloomberg News survey.

The dollar fell to $1.5559 per euro as of 10:04 a.m. in Tokyo, compared with $1.5535 in New York yesterday. It reached $1.5579, the lowest level since June 11. The U.S. currency slid to 107.71 yen from 107.88 yesterday. The euro traded at 167.60 yen from 167.58 yesterday, when it touched 168.04, the highest since July 23.

Manufacturing in the Philadelphia area of the U.S. probably contracted for the seventh month in June. The Federal Reserve Bank of Philadelphia's general economic index will probably stay at minus 10, from minus 15.6 in May, according to a Bloomberg News survey of economists before today's report.

The dollar rose 2.5 percent against the euro last week, the most since 2005, as Fed Chairman Ben S. Bernanke said economic risks have faded, prompting investors to bet the central bank will raise interest rates later this year.

The yen and the Swiss franc strengthened as a drop in stocks led traders to reduce investments in higher-yielding assets funded in Japan and Switzerland, a practice known as carry trades. In such trades, investors get funds in a country with low borrowing costs and buy assets where returns are higher.

Japan's target lending rate of 0.5 percent is the lowest among major economies. Switzerland's 2.75 percent rate compares with 7.25 percent in Australia and 8.25 percent in New Zealand.


TradingEconomics.com, Bloomberg
6/18/2008 7:10:38 PM