The dollar fell to a 16-month low against the euro after the Federal Reserve renewed its pledge to keep interest rates near zero to stimulate economic growth.
New Zealand’s dollar dropped for the first time in three days after Reserve Bank Governor Alan Bollard left interest rates at a record low and said the economic outlook “remains very uncertain.” The yen touched the lowest in two weeks against the euro as Asian stocks extended a global rally in shares, damping demand for Japan’s currency as a refuge.
“The Fed is being perceived as very dovish, with rates likely to stay low for a long time,” said Michiyoshi Kato, senior vice president of foreign-currency sales in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan’s second-largest bank by assets. “Everyone is taking on risk, which is leading to selling of the dollar and the yen.”
The dollar dropped to $1.4825 per euro as of 9:38 a.m. in Tokyo from $1.4788 in New Yorkyesterday, after earlier touching $1.4838, the weakest since Dec. 8, 2009. The U.S. currency declined to $1.6676 per pound from $1.6627, after reaching $1.6686, the lowest since Dec. 3, 2009. The yen rose to 81.97 per dollar from 82.16. Japan’s currency was at 121.48 per euro from 121.47, and touched 121.64, the least since April 13.
2 1/2 Year Low
The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, fell to 73.091, the lowest level since July 31, 2008, before trading at 73.143 from 73.324 yesterday.
The MSCI Asia Pacific Index of shares climbed 1 percent today after the Standard & Poor’s 500 Index advanced 0.6 percent yesterday.
Fed Chairman Ben S. Bernanke signaled yesterday in his first press conference after a policy decision that the central bank will maintain its record monetary stimulus.
Fed policy makers kept the target rate for overnight lending between banks at zero to 0.25 percent, as forecast by all of the economists in a Bloomberg News survey. The rate has remained at that level since December 2008.
“The Fed is clearly not thinking about tightening policy anytime soon and, from this perspective, there was nothing in the Fed’s language to arrest the dollar’s recent decline,” Spiros Papadopoulos, a senior economist in Melbourne at National Australia Bank Ltd., wrote in a note today.
The New Zealand dollar fell from a three-year high as Bollard said monetary policy won’t change for some time and called the currency’s recent advance “unwelcome.”
The so-called kiwi slid 0.3 percent to 80.54 U.S. cents after climbing to 81.08 cents yesterday, the strongest since March 19, 2008. www.bloomberg.com
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