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Dollar Trades Near 15-Year Low Against Yen on Speculation Fed to Ease More

The dollar traded near its weakest level in 15 years against the yen before a U.S. housing report that may fuel speculation the Federal Reserve will take more credit-easing measures to revive economic growth.

The greenback was about two U.S. cents from an eight-month low versus the euro before data forecast to show housing starts declined for the first time since June. Australia’s dollar traded near parity with the greenback after minutes released today said the Reserve Bank’s decision to keep the benchmark interest rate unchanged earlier this month was “finely balanced” with economic growth strengthening.

“Expectations for additional monetary easing are still weighing on the dollar,” said Kazuya Yashiro,a currency analyst at Himawari Securities,Inc. in Tokyo. “This is likely to continue at least until the next Fed meeting.”

The dollar traded at 81.37 yen at 12:31 p.m. in Tokyo from 81.27 in New York yesterday,after reaching 80.88 yen last week,the lowest since April 1995. The greenback was at $1.3935 per euro from $1.3934 after touching $1.4159 on Oct. 15,the weakest since Jan. 26. The yen fetched 113.38 per euro from 113.25.

U.S. builders broke ground on 580,000 homes at an annual rate in September,down 3 percent from August,according to economists in a Bloomberg News survey before today’s data.

Interest-rate futures contracts on the Chicago Board of Trade showed a 33 percent chance U.S. policy makers will cut the target lending rate to zero by January. The probability was 25 percent a month ago.

RBA Outlook

The so-called Aussie halted a two-day drop versus the U.S. dollar after minutes of the Reserve Bank of Australia’s meeting on Oct. 5 showed policy makers reiterated that benchmark rates would have to increase “at some point.”

“The minutes reinforce the argument that there could be another hike coming in November or December given that the RBA seems very comfortable with where the currency is,” said Tim Waterer,a foreign exchange dealer with CMC Markets in Sydney. “Unless we see something in the U.S. which changes the timetable on quantitative easing from the Fed,we will continue to see broad U.S. dollar selling in favor of traders wanting to jump into better-returning assets.”

Australia’s currency touched 99.60 U.S. cents before trading at 98.87 from 98.89. It rose above parity on Oct. 15. The currency was at 80.43 yen from 80.37.

Swaps traders raised to 40 percent the chance that the central bank will end a five-month pause and boost the key rate to 4.75 percent on Nov. 2,a Credit Suisse AG index showed. The probability of an increase was 36 percent yesterday.

Geithner’s Comments

Losses in the dollar were limited after U.S. Treasury Secretary Timothy F. Geithner said yesterday the government will preserve confidence in a strong dollar and “will not engage” in currency devaluation.

“Comments by Geithner helped the dollar regain some ground,” Brian Kim,a currency strategist in Stamford,Connecticut,at UBS AG,wrote in a research note. “He commented that he does not see a time in our lifetime when the dollar is not the world’s key reserve currency.”

Geithner will travel to South Korea this week to meet with Group of 20 finance ministers and central bankers to discuss currencies,government stimulus efforts and other economic policies. Brazil’s Finance Minister Guido Mantega said yesterday nations trying to defend exports must end the “currency war.”

Malaysia’s ringgit fell for a third day,its longest losing streak in more than two months,on concern slowing export growth in the region will prompt Asian policy makers to step up efforts to limit currency gains.

“There are noises about a currency war with everybody trying to weaken their currencies against the dollar,” said Ahmad Zubaidi Samse,a foreign-exchange trader at Bank Muamalat Malaysia Bhd. in Kuala Lumpur. “That should keep the ringgit in the recent trading range.”


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