Los mercados apuestan que a final de año los tipos de interes de USA y de la zona EURO estarán parejos al 4,5% si Trinchete no sube los tipos 0,5% o Bernanke no los baja 0,75% debería alcanzar otra paridad €/$
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Dollar Falls to Record Low Versus the Euro on Rate Differential
By Bo Nielsen and Min Zeng
Sept. 12 (Bloomberg) -- The dollar fell to a record low against the euro as investors increased bets the Federal Reserve will reduce its target interest rate, narrowing the yield advantage of the U.S. over Europe.
The currency declined for a sixth day, the longest losing streak since April, as investors wager the Fed will cut its key borrowing rate by a half-percentage point to 4.75 percent next week, narrowing the gap to 0.75 percentage point. Futures show the European Central Bank might eliminate the gap by year-end.
``The Fed will cut later this month and continue to do so this year at the same time as other major central banks will be holding, and eventually raising, rates, and that's weighing on the dollar,'' said Michael Woolfolk, senior currency strategist at the Bank of New York Mellon in New York. ``Interest-rate differentials will continue to conspire against the dollar.''
The dollar fell to $1.3909 per euro at 1:41 p.m. in New York, after earlier declining to an all-time low of $1.3914. That compares with the previous low of $1.3852 on July 24. The dollar bought 114.16 yen, from 114.27 yesterday.
Woolfolk forecasts the dollar will reach $1.40 per euro by September 2008. He forecasts a 50-basis-point reduction by the Fed this year. The U.S. currency has fallen 7 percent from its highest point this year, reached Jan. 12.
Losing Jobs
The dollar dropped more than 1 percent last week versus the euro after a government report showed the economy unexpectedly shed jobs in August for the first time in four years.
The slump continued as the National Association of Realtors said yesterday that U.S. existing home sales will fall 8.6 percent in 2007, exceeding the 6.8 percent drop estimated a month ago. New-home sales will probably decline 24 percent on top of an 18 percent drop in 2006, the realtors group said.
The dollar fell to the lowest in more than a month versus the British pound and traded at $2.0308. Against the Canadian dollar, the U.S. currency touched the lowest since the end of July, at 96.43 U.S. cents.
``It is becoming clear that U.S. growth is much weaker than the market expected,'' said Paresh Upadhyaya, who helps manage $29 billion in currency assets at Putnam Investments in Boston. ``The weakness in the U.S. economy will continue over the upcoming quarters, which will bring the Fed to cut interest rates. This will be the key driver of the dollar.''
The euro's advance against the dollar accelerated as traders had placed automatic orders to buy the currency once it passed the record, said Kenichi Yumoto, senior dealer at Societe Generale SA in Tokyo.
Bolstering Exports
The weakening dollar is bolstering U.S. exports, which reached records in each of the past five months as Boeing Co., General Electric Co. and Deere & Co. shipped more airplanes, engines and tractors overseas. The trade deficit narrowed 0.3 percent to $59.2 billion in July from a revised $59.4 billion during June, the Commerce Department said yesterday.
The dollar has declined 8.7 percent versus the euro and 10.8 percent against Australia's dollar during the past 12 months as the ECB and Reserve Bank of Australia raised rates to 4 percent and 6.5 percent, respectively, while the Fed kept its overnight lending rate between banks at 5.25 percent.
Interest-rate futures show 78 percent odds the Fed will lower borrowing costs by half a percentage point to 4.75 percent on Sept. 18. A month ago, traders expected a quarter-point cut. Traders bet there's a 54 percent chance the Fed might go to at least 4.5 percent by year-end, and increased wagers the ECB will also end the year at 4.5 percent.
Futures Contract
The implied yield on the December Euribor futures contract rose 2 basis points, or 0.02 percentage point, to 4.53 percent. The contract settles to the three-month interbank offered rate for the euro, which has averaged about 16 basis points above the ECB's key rate since 1999.
ECB President Jean-Claude Trichet said yesterday there's a risk inflation will accelerate, stoking speculation policy makers will raise rates this year. Annualized euro region labor costs, an inflation indicator, increased more than forecast in the second quarter, a report today showed.
If the Fed fails to meet market expectations of a rate cut next week, the dollar may find temporary strength as investors repatriate funds into the safety of U.S. Treasuries, said Naomi Fink, senior currency strategist at BNP Paribas SA in New York.
``The euro-dollar tends to rally when volatility is falling,'' Fink said. ``But once investors are comfortable the sell-off in U.S. assets won't be disorderly, they continue to push funds abroad.''
The dollar is the weakest in 15 years against a theoretical euro calculated from the currencies that were expected to take part in the euro zone established in 1999. The dollar reached an all-time low of $1.4557 versus the index in September 1992. Calculations go back to December 1988.
The New York Board of Trade's dollar index comparing the U.S. currency against its six primary peers fell as low as 79.322, the weakest since September 1992.
To contact the reporters on this story: Bo Nielsen in New York at bnielsen4@bloomberg.net ; Min Zeng in New York at mzeng2@bloomberg.net
Last Updated: September 12, 2007 13:42 EDT
