The dollar dropped to the lowest level in a year versus the euro as US Federal Reserve Chairman Ben Bernanke’s declaration that the recession is likely over led investors to sell the US currency and buy riskier assets.
Sterling fell last week against all of its 16 most-traded counterparts tracked by Bloomberg on revived concern banking losses will stall the UK’s economic recovery. The Fed will likely keep its target lending rate at near zero next week and extend the end date of its US$1.45 trillion program to buy securities, a strategy known as quantitative easing.
“The dollar will come under further pressure,” said Ian Stannard, a senior currency strategist at BNP Paribas SA in London, in an interview on Bloomberg Television. “This continuation of the quantitative-easing program will provide further asset-market support. That’s going to lead to dollar weakness as funds flow out of the US, seeking higher returns elsewhere.”
The dollar fell 1 percent to $1.4712 per euro, from $1.4571 on Sept. 11. It touched $1.4767 on Thursday, the weakest level since September last year.
The dollar rose 0.6 percent to ¥91.29, from 90.71, after touching 90.13 three days ago, the lowest level since Feb. 12. The yen weakened 1.6 percent to 134.33 versus the euro, from 132.17 a week earlier.
The greenback declined this week to the lowest level in more than a year against the Australian and New Zealand dollars and the Swiss franc on speculation investors bought high-yielding assets with funds borrowed in the US.
Asian currencies including the South Korean won and Indonesia’s rupiah rose last week to the highest levels this year, as increasing signs of a global economic recovery bolstered demand for emerging-market assets.
The New Taiwan dollar gained 0.5 percent to 32.458. China’s yuan and the Hong Kong dollar were little changed at 6.828 and HK$7.7502.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the 10 most-traded regional currencies excluding the yen, rallied to an 11-month high as record low rates for borrowing dollars increased appetite for higher-yielding investments. Overseas investors added to their holdings of Asian stocks, helping most benchmark share indexes extend this month’s gains.
“Central banks are not going to fight a general dollar weakening trend as long as everything’s moving together,” said Gerrard Katz, head of currency trading at Standard Chartered PLC in Hong Kong. “Dollar-Asia’s moving lower as a bloc. Risk appetite is still the main driver. Dollar rates are as well, and equities are important.”
The Korean won gained 1.2 percent this week to 1,207.80 per dollar in Seoul, data compiled by Bloomberg showed. It touched 1204.60 on Thursday, the strongest level since October.
The rupiah appreciated 2.1 percent to 9,715 and the Philippine peso rose 1.4 percent to 47.665. The Asia Dollar Index climbed 0.4 percent in the five days, a third weekly gain.
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