The dollar fell to the lowest in almost two months against the euro amid signs the U.S. economic recovery will remain sluggish and speculation European officials are addressing the region’s debt crisis.
The U.S. currency weakened against 10 of its 16 most-traded counterparts as housing starts declined to the lowest level since October 2009 and before data tomorrow that may show continuing jobless claims increased. The Swiss franc fell to a one-month low against the euro after the country’s economy minister said he is “concerned” about the currency’s strength. President Barack Obama said the yuan “remains undervalued” and urged Chinese President Hu Jintao to continue steps toward a currency “increasingly driven by the market.”
“The market is certainly bearish U.S. dollars,” said Camilla Sutton, a Bank of Nova Scotia currency strategist in Toronto. “We’re seeing spreading of the sentiment that the problems in Europe aren’t fixed, but have made progress. That’s provided some reassurance to euro traders.”
The dollar dropped 0.6 percent to $1.3473 per euro at 5 p.m. in New York, from $1.3387 yesterday. It touched $1.3539, the weakest since Nov. 23. The U.S. currency declined 0.7 percent to 82.02 yen from 82.56.
IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, dropped 0.5 percent to 78.564, after touching the lowest since Nov. 22.
Housing Slows
Housing starts declined 4.3 percent to a 529,000 annual rate last month, according to a Commerce Department report. Economists in a Bloomberg survey had estimated a 0.9 percent drop to a 550,000 annual pace.
The number of people continuing to receive jobless benefits rose to 3.99 million in the week ended Jan. 8 from 3.88 million the previous week, another survey showed before the data tomorrow.
The Fed has kept its benchmark interest rate at zero to 0.25 percent since December 2008.
Portugal’s borrowing costs fell and demand rose at the sale of 750 million euros of 12-month bills, adding to other auctions this week that signal Europe’s high-deficit countries can still finance their debt. Today’s sale came one day after Spain and Greece sold more than 6 billion euros of treasury bills.
Germany’s Finance Ministry said it was not looking into a “restructuring” of Greek debt, denying a report in Die Zeit newspaper that the German government is considering a potential buyback of Greek bonds.
No Restructuring
“We’re not working on a restructuring of Greek debt,” Finance Ministry spokesman Bertrand Benoit said in an e-mailed statement.
“As concerns over the European sovereign debt crisis have eased somewhat, that has allowed the euro room to rally,” said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon Corp., the world’s largest custodial bank, with more than $20 trillion in assets under administration.
The yuan strengthened 0.1 percent to 6.5831 per dollar after reaching 6.5817, the strongest level since China unified official and market exchange rates at the end of 1993.
U.S. Treasury Secretary Timothy F. Geithner said China should understand that the currency’s level is a “big issue.” Speaking in a radio interview broadcast yesterday, Geithner said a stronger yuan is in China’s interest and a rising currency would help the nation manage inflation.
China Policy
“The U.S. is expected to keep pushing China to strengthen its currency,” said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd., which provides foreign-exchange margin-trading services. “It will likely weaken the dollar.”
Hu met with Obama, 14 U.S. business leaders and four Chinese corporate leaders today as part of the Chinese leader’s visit to the U.S. Before the meeting, the two countries announced a package of export deals worth $45 billion.
Swiss National Bank Vice President Thomas Jordan said on Jan. 14 he is “concerned” about the franc, which has surged more than 14 percent since the start of 2009. Jordan said the franc’s strength poses an “extraordinary challenge” to some exporters, though he refused to say whether policy makers were planning a renewed round of foreign-currency purchases to weaken the franc.
The SNB spent more than a year intervening in markets to weaken the currency to head off deflation risks before abandoning the policy in June.
The franc fell 0.3 percent to 1.2865 per euro after touching 1.2998, the weakest level since Dec. 14.
The currencies of commodity-exporting countries rallied before a report tomorrow forecast to show economic growth stayed above 9 percent in China.
Inflation Cools
China’s inflation cooled to 4.6 percent in December from 5.1 percent, while the economy grew 9.4 percent in the fourth quarter bringing full-year growth to 10.2 percent, according to Bloomberg surveys before tomorrow’s reports.
Australia’s dollar rose 0.2 percent to $1.0009. China is the South Pacific nation’s largest trading partner. Norway’s krone added 0.2 percent to 5.8195 per dollar.
A government report tomorrow may show December’s inflation slowed to a 4.6 percent pace from 5.1 percent in November, according to the median of economists in a Bloomberg News survey.
“Inflation cooling in the emerging-market world is going to be positive for risky assets,” said Jessica Hoversen, a Chicago-based analyst at the futures broker MF Global Holdings Ltd. “It eliminates the growth threat and reduces the need for policy tightening.”
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