Dollar Falls to Lowest Since April


The dollar dropped to the lowest level since April and headed for a weekly loss on concern the U.S. government may be forced to take over mortgage lenders Fannie Mae and Freddie Mac.

The currency fell against the yen and reached a 25-year low versus the Australian dollar before a report forecast to show U.S. consumer confidence declined this month. Canada's dollar decreased against all of the other major currencies after a government report showed employers unexpectedly eliminated positions in June. Crude oil rose to a record.

The dollar fell 0.9 percent to $1.5923 per euro at 9:32 a.m. in New York, from $1.5788 yesterday. It touched $1.5927, the weakest since April 23. The U.S. currency fell 0.9 percent to 106.12 yen, from 107.07. The euro declined 0.2 percent to 168.68 yen, from 169.05. The Australian dollar rose as much as 0.6 percent to 96.78 U.S. cents, the strongest level since 1983.

The U.S. currency is headed for a 1.2 percent decline against the euro this week for the third drop in four weeks. The dollar has decreased 0.6 percent versus the yen, which has declined 0.6 percent against the euro.

The Dollar Index traded on ICE futures in New York, which tracks the greenback against the currencies of six U.S. trading partners, dropped as much as 0.5 percent to 72.161, the lowest level since July 2. It has fallen 0.7 percent this week.

The U.S. government is considering placing Fannie and Freddie, the two largest buyers of U.S. home loans, in a conservatorship, according to a person familiar with the discussions who spoke on condition of anonymity. The companies' losses would be covered by taxpayers.

Crude oil rose more than $5 to a record above $145 a barrel on concern Israel may be preparing to attack Iran. The euro- dollar exchange rate and oil have moved in the same direction 90 percent of the time during the past year, according to Bloomberg calculations based on the correlation of their value changes.

The dollar has fallen 11 percent against the euro since Sept. 18, when the Federal Reserve made the first of seven reductions in its target rate for overnight lending between banks to help avert a recession. Futures on the Chicago Board of Trade show 91 percent odds policy makers will keep borrowing costs unchanged at 2 percent at their next meeting on Aug. 5, compared with a 43 percent chance a month ago.

Risks that inflation will accelerate have intensified, European Central Bank President Jean-Claude Trichet told European lawmakers on July 9, following the bank's decision last week to raise the main refinancing rate by a quarter-percentage point to 4.25 percent.


TradingEconomics.com, Bloomberg
7/11/2008 6:56:19 AM