The dollar fell for a third day this week, tracking a decline in stocks, on concern a sluggish economic rebound will drive investors away from US investments.
Weaker-than-expected economic reports in past weeks have led analysts in the Blue Chip Economic Indicators survey to lower forecasts for US growth, underscoring the decreased allure of stocks and bonds and the dollars to pay for them, investors said.
"Dollars that were flying into the US now are staying home," said Joseph Portera, head of fixed income at Mackay Shields Financial Corp, which manages US$32.5 billion.
The dollar fell to ?127.64 per dollar from ?128.33 late on Friday and to US$0.9139 per euro from US$0.9093. While the dollar advanced for the first week in six against the euro, rising 0.4 percent, it is less than a cent from a seven-month low of US$0.9190 reached Tuesday. The US currency gained against the yen for the first week in four, also climbing 0.4 percent.
Growth in the world's largest economy will subside from its 5.8 percent annualized rate in the January-March period to a 3.1 percent rate in the second quarter, according to the consensus forecast of 51 economists in the May Blue Chip survey.
That will narrow the difference with growth in the 12-nation Euro region, which the European Commission projects will be between 0.4 percent and 0.7 percent in the second quarter.
So far this quarter the dollar has dropped 4.7 percent against the euro and 3.9 percent against the yen, driven down in part as investors sold US stocks. The NASDAQ Composite Index has slumped 13 percent in the period while the Standard & Poor's 500 Index charted its seventh weekly drop in eight.
Traders expect "dollar strength is going to be abating, coupled with US asset markets," said Scott Schultz, a currency trader at Brown Brothers Harriman & Co. "There's not a lot of good news surrounding the dollar, and likewise the stock market."
More signs of economic weakness may prompt further losses in stocks, hurting the dollar, investors said. The Federal Reserve left its interest-rate target at a 40-year low of 1.75 percent Tuesday, saying a sustainable recovery is "still uncertain."
"The market is finally realizing the dollar won't be the strongest currency in coming months," said Murray Gunn, foreign-exchange investment director at Standard Life Investments in Edinburgh, Scotland, where he helps manage ?78 billion (US$114 billion). The euro may reach US$0.94 in the next two months, Gunn said.
The dollar failed to gain ground after the government said US producer prices unexpectedly fell in April, following a 1 percent climb in March. Producer prices declined 0.2 percent last month, compared with forecasts of a 0.4 percent rise, easing concerns inflation will accelerate.
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