Fisher Capital Management Investment: Dollar Falls a Second Day Versus Euro as Slowdown Spurs Easing Prospects

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Alabama, Alabama, United States of America (Free-Press-Release.com) August 16, 2011 -- http://www.bloomberg.com/news/2011-08-03/dollar-falls-2nd-day-versus-euro-as-slowdown-signs-spur-easing-prospects.html

The dollar fell versus the euro for a second day on speculation the Federal Reserve will consider increasing monetary stimulus to counter a slowdown in the U.S. economy.

The U.S. currency dropped against most of its major counterparts before reports forecast to show U.S. initial jobless claims rose and the unemployment rate remained above 9 percent. The yen held a two-day decline against the euro on prospects the Bank of Japan will follow its Swiss counterpart in easing monetary policy to curb currency strength.

“The dollar will still continue to fall significantly,” said Kurt Magnus, executive director of currency sales at Nomura Holdings Inc. in Sydney. In the U.S. there’s “no recovery whatsoever. I think interest rates will remain zero for the whole of 2012.”

The dollar fell to $1.4352 per euro as of 9:17 a.m. in Tokyo from $1.4323 in New York yesterday. The yen was at 110.54 per euro from 110.38. The dollar was little changed at 77.03 yen. The Dollar Index, which tracks the dollar against the currencies of six major U.S. trading partners, declined 0.8 percent yesterday.
U.S. Jobs

U.S. initial jobless claims climbed by 7,000 to 405,000 last week, according to the median estimate of economists in a Bloomberg News survey before today’s data. The jobless rate was unchanged at 9.2 percent and payrolls advanced by 85,000 workers in July, other surveys showed before tomorrow’s data.

Interest-rate futures contracts on the Chicago Board of Trade showed a 53.2 percent chance U.S. policy makers would cut the target lending rate to zero by December. The probability was 43.6 percent a month ago.

The U.S. government’s top credit rating of AAA may be lowered in the medium term even after a debt-limit compromise that prevented a default, according to Fitch Ratings. President Barack Obama signed legislation on Aug. 2 that raises the debt ceiling to accommodate U.S. borrowing needs until 2013 and threatens automatic spending cuts to enforce $2.4 trillion in reductions over the next 10 years.
Japanese Finance Minister Yoshihiko Noda yesterday said the nation would aim for “maximum effect” in any intervention to weaken the yen. That preceded a cut in interest rates by Swiss authorities to stem the franc’s surge. Japanese policy makers have signaled increased concern this week about the yen nearing a postwar high that threatens exporters’ profits and the nation’s recovery from a record earthquake in March.

Intervention Effect

“Even if there’s intervention, its effect will be temporary,” said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd., which provides foreign-exchange margin-trading services. “The yen’s appreciation bias continues.”

Five of 14 economists surveyed by Bloomberg News said the Bank of Japan will increase stimulus at its policy meeting that will end tomorrow.

The Swiss National Bank lowered its target for the three- month London interbank offered rate to “as close to zero as possible,” from 0.25 percent. The franc weakened to 1.1057 versus the euro from 1.1033 yesterday, when it slid 1.9 percent. It was little changed at 77.03 centimes per dollar after falling 1.1 percent yesterday.

The franc has gained 9.4 percent over the past month, making it the best performer among 10 major-economy currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen has risen 3.6 percent, while the dollar is down 1.7 percent and the euro has declined 3 percent.
-- With assistance from Kristine Aquino in Singapore. Editors: Rocky Swift, Benjamin Purvis
To contact the reporters on this story: Yoshiaki Nohara in Tokyo atynohara1@bloomberg.net; Masaki Kondo in Singapore atmkondo3@bloomberg.net

To contact the editor responsible for this story: Rocky Swift atrswift5@bloomberg.net.

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