The dollar fell to a one-week low against the euro in Asia after Treasury Secretary John Snow said the Federal Reserve can wait before raising interest rates.
Snow on Monday said tame US inflation will let the Fed "wait and be patient" before raising its benchmark target rate from a 45-year low of 1 percent, half that of the European Central Bank and one-quarter of the UK's key interest rate.
"The US is not ready at all to move forward to raising interest rates," said Xinyi Lu, chief strategist in Tokyo at UFJ Bank Ltd, a unit of Japan's fourth-largest lender. "The dollar resumed its weakening trend as it's not attractive."
The dollar fell to US$1.2443 per euro at 2:59pm yesterday in Tokyo from US$1.2405 late in New York on Monday, according to EBS prices, the lowest since March 2. The US currency may drop to US$1.3 per euro within three months, Lu said. The dollar was also at ?111.25 from ?111.18.
The US consumer price index, excluding food and energy prices, rose 1.1 percent in January from a year earlier, matching the gain for last year, the smallest annual increase in 43 years, according to Labor Department data.
The US currency has declined 12 percent against the euro in the past year as lower interest rates in the US diminished the attraction of dollar-denominated assets. The dollar had its biggest decline in five weeks on Friday after a report showed US employers created 21,000 jobs in February, below the lowest forecast of economists.
The job figures caused traders to scale back their expectations of a US interest rate increase.
The rate on the September Eurodollar futures contract has fallen 16.5 basis points in the past three days to 1.305 percent. A basis point is 0.01 percentage point.
``The euro's strength is surely taking its toll on the European economy,'' said Shimpei Uike, who helps manage the equivalent of $600 million of foreign debt in Tokyo at Asahi Life Asset Management Co. ``The euro's appeal doesn't have much to do with the economy, but more to do with the dollar's weakness.''
Any decline in the dollar against the yen may prompt Japan to sell its currency to protect exporters' earnings, said traders and investors including Chris Melendez. The dollar yesterday had its biggest one-day drop against the yen in six weeks.
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