The dollar fell for a fourth week against the euro, its longest slump since August, on concern the pace of the US economic rebound will fall short of previous expectations. It sank a second week against the yen.
Recent economic reports have suggested the recovery may lose steam in coming months, raising concern the 5.8 percent annualized first-quarter expansion reported today will prove unsustainable.
Expectations of flagging growth are decreasing the attractiveness of some US financial assets and demand for dollars.
The dollar's weakness is "a reaction to the fact that markets were pricing in a very aggressive economic recovery," said Lara Rhame, a currency economist at Brown Brothers Harriman & Co. Those projections were "a little bit overdone."
The dollar dropped to US$0.902 per euro, its weakest level since Jan. 3, from US$0.898 on Thursday. The US currency fell to ?127.89, reaching a six-week low, from ?128.66. It has lost 1.9 percent against the yen since last Friday, its fourth weekly drop in five. It shed 1 percent this week against the euro.
The currency fell after a University of Michigan survey showed consumer sentiment dropped to a two-month low in April.
Statistics this week showing an unexpected drop in March durable goods orders and a larger-than-forecast decline in existing home sales helped fueled concern the US economy may lose momentum.
Growth will likely cool to 3 percent this quarter, according to a Bloomberg News survey. Gross domestic product grew at a 1.7 percent rate in the fourth quarter after contracting in the third.
Some investors are concerned US growth won't outperform that of Europe by as much as previously expected. The German economy, Europe's largest, is forecast to expand 0.9 percent this year and 2.4 percent in 2003, according to the country's six top economic research institutes.
"Markets had believed the recovery was pretty much in the bag -- now the picture is mixed," said Simon Rubinsohn, who helps manage ?23 billion (US$33 billion) as chief economist at Gerrard Ltd. in London.
"Sentiment has turned against the US and there's an anti-dollar feel" in the market.
The dollar is also getting hurt because US stocks still appear too expensive relative to those in Europe, when looking at price-earnings ratios and dividend yields, said Peter Cera, a portfolio strategist at Mellon Financial Corp. in Boston.
One gauge of the higher appeal of European shares is that their dividend yield, an indication of the income generated by a share, tends to be higher, he said.
The dividend yield on the S&P 500 Index is 1.46, while the Bloomberg Europe index has a dividend yield of 2.34.
"A lot of the ingredients are there" for investors to start shifting funds out of the US, said Cera, adding that he expects the dollar to keep declining.
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