Dollar May Extend Drop


The dollar may fall against the euro before an industry report forecast to show U.S. pending sales of existing homes fell in May by the most in six months.

The U.S. currency may extend yesterday's drop on concern credit market losses will swell after Lehman Brothers Holdings Inc. said Fannie Mae and Freddie Mac, the largest two U.S. mortgage financers, may have to raise $75 billion in capital. The New Zealand dollar traded near a three-week low as a report said companies had the lowest profit expectations in 25 years.

The dollar traded at $1.5719 per euro at 8:07 a.m. in Tokyo from $1.5726 yesterday in New York. The yen was at 107.15 per dollar, little changed from late yesterday. Japan's currency traded at 168.42 versus the euro from 168.55. The dollar may decline to $1.5745 per euro and 106.60 yen today, Soma forecast.

The dollar weakened yesterday as the Standard & Poor's 500 Index dropped 0.8 percent, extending its plunge from an October record to more than 20 percent. Yields on two-year Treasury notes touched the lowest in a month as traders sought safety in government securities.

U.S. pending home resales probably fell 3 percent in May, after increasing 6.3 percent in the previous month, according to the median forecast of 36 economists surveyed by Bloomberg News. That would be the biggest decline since November. The National Association of Realtors is scheduled to release its report at 10 a.m. in Washington.

President George W. Bush said on July 6, the first day of his five-day trip to Japan for the Group of Eight summit, that the U.S. ``believes in a strong-dollar policy.'' Leaders from the G-8, including Canada, France, Germany, Italy, Japan, Russia, the U.K. and the U.S., are meeting in Hokkaido, Japan. Central bankers aren't attending the meeting.

The dollar fell 0.6 percent against the euro on June 16 after G-8 finance ministers, meeting without central bankers, stopped short of making a joint comment on currencies.

The euro fell earlier yesterday against the dollar as the Economy Ministry said German industrial production dropped 2.4 percent in May, the most in more than nine years. U.S. economic growth will ``pick up'' next year, Federal Reserve Bank of San Francisco President Janet Yellen said yesterday in San Diego.


TradingEconomics.com, Bloomberg
7/7/2008 5:35:00 PM