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The dollar dropped
The dollar dropped to a record low versus the euro and the weakest in 26 years versus the pound on speculation losses from subprime mortgages will worsen the U.S. economic outlook. The U.S. currency fell a sixth straight week against the euro and pound, while tumbling to a 22-year low versus the New Zealand dollar and the weakest in 18 years against the Australian dollar. The dollar may extend its drop next week as U.S. reports may show declining sales of existing and new homes. ``The outlook for the dollar is still bearish,'' said Robert Robis, an international fixed-income portfolio manager in New York at OppenheimerFunds Inc., which oversees $250 billion. ``There are still significant concerns that the subprime debacle will lead to more serious problems in the financial markets.'' The dollar fell 0.3 percent this week to $1.3827 per euro, 1.1 percent to $2.0561 per pound and 0.5 percent to 121.27 yen. Robis predicted the dollar will drop to at least $1.4 against the euro and $2.1 per pound in the next three months. The dollar yesterday touched $1.3843, the weakest since the euro's January 1999 debut, and $$2.0587 per pound, the lowest since May 1981. The U.S. currency also slumped to 79.92 U.S. cents per New Zealand dollar, the weakest since the central bank allowed the currency to trade freely in 1985, and touched 88.34 U.S. cents per Australian dollar, the weakest since 1989. `More Downside' ``You are going to see more downside in the dollar,'' said Rafael Martorell, chief dealer of spot foreign exchange at BNP Paribas Securities SA in New York. ``People are getting nervous about the credit market. The concern is this may weaken U.S. growth.'' Existing home sales in the U.S. probably slowed to an annual pace of 5.87 million last month from 5.99 million in May, according to the median forecast in a Bloomberg News survey. The National Association of Realtors releases the data on July 25. A government report the next day is forecast to show new home sales slowed to an annual pace of 892,000 in June from 915,000 a month earlier, according to a separate survey. The Federal Reserve kept its benchmark rate at 5.25 percent for an eighth straight meeting on June 28. The rate compares with benchmarks of 4 percent in the euro zone, 5.75 percent in the U.K., 6.25 percent in Australia, 8 percent in New Zealand and 0.5 percent in Japan. The yield on December fed funds futures fell to 5.18 percent yesterday, the lowest in a month, from 5.215 percent a week earlier. The yield suggests traders see about a 40 percent chance the Fed will cut its benchmark to 5 percent by year-end, up from 21 percent a week ago. Yen Rebounds Standard & Poor's cut ratings on European collateralized debt obligations yesterday and gauges of investor appetite for corporate bonds and loans fell. Fed Chairman Ben S. Bernanke said July 19 there will be ``significant financial losses'' on mortgages given to people with poor credit. The yen rose from near a record low against the euro and rose to a six-week high versus the dollar as losses in stocks prompted investors to pare holding of riskier assets funded by loans in Japan. U.S. stock benchmarks dropped from record highs this week while Treasuries rose as investors sought safety in government debt. The Japanese currency rose 0.3 percent this week to 167.61 per euro, rebounding from a record low of 168.95 on July 13. `Riskier Assets' ``The subprime concern is also pushing people to reduce some appetite for riskier assets, which will benefit the yen,'' said Samarjit Shankar, director of global strategy for the currency group at Bank of New York Mellon in Boston. ``But I don't think it will last. The appetite to seek higher yielders is still there.'' Japanese consumer prices excluding food probably declined 0.1 percent last month from the year-earlier period, after a 0.1 percent drop a month earlier, according to the median forecast in a Bloomberg News survey. The data is set for release on July 27 in Tokyo. Falling prices may fuel speculation the Bank of Japan will refrain from lifting rates. The New Zealand dollar gained against all 16 major currencies this week on speculation the nation's central bank will boost borrowing costs next week. The Reserve Bank of New Zealand may lift the rate to 8.25 percent next week, according to the median forecast in a Bloomberg News poll.
The dollar dropped to a record low versus the euro and the weakest in 26 years versus the pound on speculation losses from subprime mortgages will worsen the U.S. economic outlook. The U.S. currency fell a sixth straight week against the euro and pound, while tumbling to a 22-year low versus the New Zealand dollar and the weakest in 18 years against the Australian dollar. The dollar may extend its drop next week as U.S. reports may show declining sales of existing and new homes. ``The outlook for the dollar is still bearish,'' said Robert Robis, an international fixed-income portfolio manager in New York at OppenheimerFunds Inc., which oversees $250 billion. ``There are still significant concerns that the subprime debacle will lead to more serious problems in the financial markets.'' The dollar fell 0.3 percent this week to $1.3827 per euro, 1.1 percent to $2.0561 per pound and 0.5 percent to 121.27 yen. Robis predicted the dollar will drop to at least $1.4 against the euro and $2.1 per pound in the next three months. The dollar yesterday touched $1.3843, the weakest since the euro's January 1999 debut, and $$2.0587 per pound, the lowest since May 1981. The U.S. currency also slumped to 79.92 U.S. cents per New Zealand dollar, the weakest since the central bank allowed the currency to trade freely in 1985, and touched 88.34 U.S. cents per Australian dollar, the weakest since 1989. `More Downside' ``You are going to see more downside in the dollar,'' said Rafael Martorell, chief dealer of spot foreign exchange at BNP Paribas Securities SA in New York. ``People are getting nervous about the credit market. The concern is this may weaken U.S. growth.'' Existing home sales in the U.S. probably slowed to an annual pace of 5.87 million last month from 5.99 million in May, according to the median forecast in a Bloomberg News survey. The National Association of Realtors releases the data on July 25. A government report the next day is forecast to show new home sales slowed to an annual pace of 892,000 in June from 915,000 a month earlier, according to a separate survey. The Federal Reserve kept its benchmark rate at 5.25 percent for an eighth straight meeting on June 28. The rate compares with benchmarks of 4 percent in the euro zone, 5.75 percent in the U.K., 6.25 percent in Australia, 8 percent in New Zealand and 0.5 percent in Japan. The yield on December fed funds futures fell to 5.18 percent yesterday, the lowest in a month, from 5.215 percent a week earlier. The yield suggests traders see about a 40 percent chance the Fed will cut its benchmark to 5 percent by year-end, up from 21 percent a week ago. Yen Rebounds Standard & Poor's cut ratings on European collateralized debt obligations yesterday and gauges of investor appetite for corporate bonds and loans fell. Fed Chairman Ben S. Bernanke said July 19 there will be ``significant financial losses'' on mortgages given to people with poor credit. The yen rose from near a record low against the euro and rose to a six-week high versus the dollar as losses in stocks prompted investors to pare holding of riskier assets funded by loans in Japan. U.S. stock benchmarks dropped from record highs this week while Treasuries rose as investors sought safety in government debt. The Japanese currency rose 0.3 percent this week to 167.61 per euro, rebounding from a record low of 168.95 on July 13. `Riskier Assets' ``The subprime concern is also pushing people to reduce some appetite for riskier assets, which will benefit the yen,'' said Samarjit Shankar, director of global strategy for the currency group at Bank of New York Mellon in Boston. ``But I don't think it will last. The appetite to seek higher yielders is still there.'' Japanese consumer prices excluding food probably declined 0.1 percent last month from the year-earlier period, after a 0.1 percent drop a month earlier, according to the median forecast in a Bloomberg News survey. The data is set for release on July 27 in Tokyo. Falling prices may fuel speculation the Bank of Japan will refrain from lifting rates. The New Zealand dollar gained against all 16 major currencies this week on speculation the nation's central bank will boost borrowing costs next week. The Reserve Bank of New Zealand may lift the rate to 8.25 percent next week, according to the median forecast in a Bloomberg News poll.
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