New York, April 25 (Bloomberg) -- The dollar fell against the euro after a report showed durablegoods orders declined in March, not including transportation, suggesting U.S. economic growthmay continue to slide. Some investors say they're betting against the U.S. on the view growth in the world's biggesteconomy will fall short of that in Europe. The U.S. currency pared losses after a separate reportshowed home sales rose last month, and as U.S. stocks gained. The dollar broke a two-day rally against the euro, slipping to 89.66 U.S. cents, from 89.42 lateyesterday in New York. It weakened to 122.21 yen, from 122.25 yesterday, from a high of 122.64earlier today. The dollar also fell against the British pound and the Swiss franc. Lagging U.S. growth ``should put pressure on the dollar,'' said Rick Zauderer, a trader at Friedberg Mercantile Group in Toronto, which manages about $1 billion. Friedberg is buying euros, as itexpects the dollar to slide to 98 cents per euro within six months. That would be the euro'sstrongest since February 2000. Zauderer pointed to the move by the International Monetary Fund to cut its forecast for U.S.growth this year by 1.7 percent, while it only slashed its euro zone projection by 1 percent. TheIMF now expects the U.S. to grow 1.5 percent this year, and the euro zone 2.4 percent, accordingto the German Finance Ministry. Apart from transportation, orders for U.S. durables goods fell 1.8 percent in March, according toCommerce Department statistics.
U.S. Inflation
Adding to the dollar's fall, said some analysts, is concern a government report tomorrow will showU.S. employment costs accelerated in the first quarter, which may mean the Federal Reservewon't have room to cut interest rates much further. The central bank has already reduced itsbenchmark rate by 2 percentage points since the start of the year, to 4.5 percent. The specter of inflation is ``the main threat to the dollar,'' as it could prevent the Federal Reservefrom lowering rates again to foster growth, said Andrew Delano, a currency analyst atIDEAglobal.com. While reduced interest rates may work against the currency by leading some investors to funnelfunds to economies with higher returns, in recent months investors have instead favored the dollar,on the view the Fed was moving quickly to avert a recession. The dollar has gained 5.6 percent so far this year against a basket of other major currencies,including the euro, the yen and the British pound.
ECB Rates
Some traders didn't expect the euro to sustain today's rally against the dollar. After reports thisweek of accelerating inflation in Germany, the euro region's largest economy, there is lingeringconcern the European Central Bank will forego lowering its 4.75 percent benchmark ratetomorrow, sending the euro lower. Peter Lorraine, a managing director of foreign exchange at Brown Brothers Harriman & Co., saidhe sold euros earlier today when the 12-nation currency reached the 90-cent level. ``The (currency) market will take the euro down again'' if the central bank doesn't lower rates, hesaid. Above 90.20 cents, ``the euro really runs into trouble,'' said Carl Forcheski, vice president ofcorporate foreign-exchange sales at Societe Generale. The euro has closed above 90 cents oncein the past 2 1/2 weeks, when it finished New York trading at 90.22 cents on Friday. The difficulty of coordinating monetary policy for the 12 euro nations is a drag on the euro, saidForcheski. ``The one-size- fits-all (monetary) policy is still going through its growing pains,'' he said. The yen fell to 109.57 per euro, from 109.30 yesterday, on concern Japanese Prime Minister-electJunichiro Koizumi may have difficulty cutting government bond sales and carrying out otherpledges he made to turn around Japan's economy. Japan's currency also fell earlier today after the government said the economy grew 0.7 percent inthe fourth quarter of 2000, down from the 0.8 percent expansion rate the government initiallyannounced last month. In other trading, the dollar fell against the British pound, to $1.4403 per pound from $1.4341, andversus the Swiss franc to 1.7061 francs from 1.7136. It rose against the Canadian dollar to C$1.5500 from C$1.5457.