London, Nov. 11 (Bloomberg) -- The dollar fell against the yen and was near a 16-week low versus the euro as slowing economic growth damps demand for U.S. assets and the currency to buy them. ``Poor growth and low interest rates make the dollar pretty unappetizing,'' said Scott Barlass, who oversees $22 billion at Abbey National Asset Managers in Glasgow. ``It looks like we are heading for another slowdown.'' The U.S. currency won't be attractive unless it weakens to $1.05 per euro, he said.
The dollar fell to an eight-week low of 119.33 yen at 12:50 p.m. in London, from 119.74 late Friday. It was at $1.0138 per euro, after earlier reaching $1.0171, its weakest in 16 weeks. Trading may be lighter than usual because U.S. banks are closed for the Veterans Day holiday, analysts said. U.S. stock futures were little changed amid speculation a nine-year low in consumer confidence and rising unemployment will drag down company profits. Stocks declined on Thursday and Friday after the Federal Reserve cut its key interest rate for the 12th time since January 2001, boosting concern that economic growth is slowing and depressing returns on some government bonds.
Investors holding the 4 percent U.S. Treasury note maturing in November 2012 receive 59 basis points less in annualized yield than buyers of the German 5 percent note due in July 2012. That compares with 36 basis points three weeks ago and indicates the relative return on U.S. assets is falling. A basis point is 0.01 percentage point. ``The highest-yielding assets are outside the U.S.,'' said Jeremy Stretch, a currency strategist at RBC Capital Markets. ``There is the prospect of further gains for the euro and yen.''
The Fed on Wednesday cut its target for overnight bank lending to a 41-year low of 1.25 percent. The rate compares with the European Central Bank's 3.25 percent. Lower rates hurt returns by depressing the amount of interest paid on borrowing. ``Sentiment has turned a lot worse on the dollar,'' said Geraldine Concagh, a senior economist at Allied Irish Banks. ``The economy, and interest-rate differential with Europe means it will stay under pressure.''
`Not Good'
The dollar's 12 percent decline in the against the euro this year means a euro-based investor buying U.S. bonds maturing in more than a year has lost 2.6 percent, while a dollar-based investor buying similarly dated German bonds made 21.9 percent, according to Bloomberg indexes. A record shortfall in the U.S. current account, the broadest measure of international trade because it includes income on investments, means the country must attract more than $1.3 billion a day to maintain the dollar's value, analysts said. The latest Blue Chip Economic Indicators survey shows economists' forecast annualized fourth-quarter growth of 1.6 percent, from the 2.2 percent pace estimated in October, as consumers rein in spending and businesses delay investments.
``The main focus is the U.S. stock market and economy,'' said Takeo Okabe, senior foreign-exchange manager at Daiwa Bank. ``The U.S. corporate outlook is not good for the dollar.'' The currency may also weaken on concern U.S. consumer confidence will deteriorate amid speculation about a possible war with Iraq. U.S. National Security Advisor Condoleezza Rice on Sunday said she's ``very skeptical'' Iraqi President Saddam Hussein will comply with a United Nations resolution calling on him to provide a list of weapons sites.
`Not Appropriate'
Gains in the yen may be limited after Haruhiko Kuroda, vice finance minister for international affairs, said Japan will take measures to stem its advance. ``The yen's recent gain against the dollar is not appropriate and Japan will take appropriate action in the foreign-exchange market,'' Kuroda said, raising concerns the Bank of Japan may sell yen. The Japanese currency has gained 3.5 percent against the dollar in the past month. ``The market is getting antsy and it's quite likely'' the central bank will sell yen, said Marshall Gittler, senior currency strategist at Deutsche Bank AG in Tokyo. ``The lower the dollar goes against the yen, the more likely BOJ intervention becomes.''
The Bank of Japan sold 4 trillion yen ($33.4 billion) over seven days in May and June -- a record for one quarter. It didn't sell any in the third quarter, though the yen strengthened to 115.54 on July 16. The last time the bank sold the currency was on June 28, when the dollar traded between 118.40 and 120.26 yen. In other trading, the dollar was at 1.4435 Swiss francs, from 1.4439. The British pound was at $1.5918, from $1.5898. //www.quote.bloomberg.com