Dollar Heads for Biggest Weekly Drop Against Euro in a Month

Agnes Lovasz and Kosuke Goto
Bloomberg
Friday, March 28, 2008

The dollar headed for its biggest weekly decline in a month against the euro as traders raised bets the Federal Reserve will cut interest rates to avert a recession.

The currency was also poised to drop versus the British pound and the Swiss Franc before a U.S. government report today that will probably show growth in consumer spending slowed. The yen fell against the Australian and New Zealand dollars as gains in Asian stocks prompted traders to increase holdings of higher- yielding assets funded with loans from Japan.

``There are further declines ahead for the dollar,'' said Antje Praefcke, a Frankfurt-based currency strategist at Commerzbank AG, Germany's second-largest lender. ``The U.S. is probably facing a recession and the Fed will cut rates further. There are ongoing problems with the financial sector. All of this is not good news for the dollar.''

The dollar traded at $1.5812 per euro at 7:15 a.m. in New York, from $1.5779 yesterday and $1.5431 a week ago. The U.S. currency rose to 99.97 yen, from 99.65 yesterday and 99.58 at the end of last week. Japan's currency weakened to 158.10 per euro, from 157.21 yesterday and 153.55 on March 21.

The dollar, which dropped 2.4 percent this week, will trade in the $1.5750 to $1.58 range today before falling to a record $1.60 within the next two weeks, Praefcke predicted.

New Zealand's dollar advanced after a statistics bureau report showed the nation's economic growth in the fourth quarter accelerated at the fastest annual pace in three years. The currency rose to as high as 80.68 U.S. cents, before trading at 80.54 cents, from 80.35 cents. It also gained 0.6 percent to 80.56 yen. The Australian dollar strengthened 0.6 percent to 92.40 U.S. cents and 0.9 percent to 92.41 yen.

Full article here.