Dollar Declines on Concern U.S.'s Economic Growth Is Slowing

By Ron Harui

Nov. 3 (Bloomberg) -- The dollar fell for the first time in three days against the euro on speculation that growth in the world's largest economy will slow further, backing the case for the Federal Reserve to cut interest rates.

The U.S. currency may decline for a second week as economists forecast the Institute for Supply Management's manufacturing index will drop to the lowest level since October 2001. The greenback also weakened versus 11 of the 16 most-active currencies as a Labor Department report on Nov. 7 may show payrolls contracted for a 10th straight month in October.

``I would expect another week of poor economic news that will reinforce the headwinds facing the global economy,'' said John Horner, a currency strategist at Deutsche AG in Sydney. ``This is something that should weigh on the dollar'' against the yen in particular, he said.

The dollar declined to $1.2772 per euro as of 8:01 a.m. in Singapore from $1.2726 late in New York on Oct. 31. It traded at 98.54 yen from 98.46 yen. The U.S. currency fell to $1.6113 against the British pound from $1.6076, and dropped to 1.1559 versus the Swiss franc from 1.1578. Trading volumes may be lower than normal today because of a public holiday in Japan.

Japan's currency weakened 0.5 percent to 125.89 per euro from 125.30 in New York on Oct. 31. It also fell 0.6 percent to 66.13 against Australia's dollar, from 65.74, and declined 0.9 percent to 57.90 versus New Zealand's dollar from 57.38.

The Institute for Supply Management's factory index declined to 41.5 in October from 43.5 the previous month, according to economists surveyed by Bloomberg News. A reading of less than 50 signals contraction. The report is scheduled for release at 10 a.m. in New York. Payrolls at U.S. employers shrank by 200,000 workers in October, a separate Bloomberg survey showed.

Futures on the Chicago Board of Trade indicate a 55 percent probability the Fed will reduce the target rate to 0.5 percent at its Dec. 16 meeting. The odds a week ago were zero. The rest of the bets are for a quarter-percentage point reduction.

To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net