Economic Calendar

Tuesday, December 22, 2009

Dollar Falls Versus Euro on Concern Gain Outpaced Rate Outlook

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By Bo Nielsen

Dec. 22 (Bloomberg) -- The dollar fell from near its highest level in almost three months against the euro on concern recent gains overstated the prospects for interest-rate increases as the U.S. economy emerges from the recession.

Federal Reserve Bank of Chicago President Charles Evans yesterday said the jobless rate will probably stay “quite high” next year, damping speculation the central bank plans to raise rates. The dollar had strengthened against all major currencies since Dec. 4, when a report showed falling unemployment and fueled speculation the Fed would move sooner than some economists had expected.

“The dollar has moved too fast compared with what we see coming from the Fed,” said Carl Hammer, a senior currency strategist in Stockholm with SEB AB, Sweden’s third-biggest bank. “The Fed can afford to be patient, and we still see a couple of quarters of dollar weakness left.”

The U.S. currency was at $1.4325 per euro at 8:33 a.m. in London from $1.4275 in New York yesterday. It earlier touched $1.4266, close to the $1.4262 level reached last week that was the highest since Sept. 4. The yen was at 130.65 per euro from 130.18. The dollar will trade at $1.50 by the end of March, SEB’s Hammer said.

The dollar pared its decline after Greece’s government bond ratings were cut one step to A2 from A1 at Moody’s Investors Service, less than some strategists expected.

To contact the reporter on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net




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