/www.fxserver.com/ THE dollar declined to its lowest in five weeks against the euro yesterday after some US companies cut profit forecasts, prompting traders to speculate international investors will reduce their purchases of US assets.
Declining investment by Europeans and Japanese in US stocks and corporate bonds would sink the dollar because the country needs $1.5 billion in foreign capital a day to offset its current account deficit, according to analysts.
"It's a weaker dollar story across the board," said Kurt Magnus, head of foreign exchange sales for Europe at Westpac Banking Corp., which had the second-most accurate euro-yen forecast for the first quarter in a Bloomberg News survey.
"The US market is in big trouble and there's no growth; there's no sign of any major recovery."
The US currency slid to $1.0983 at 10am in New York from $1.0871 yesterday. It weakened earlier to $1.10 per euro for the first time since March 11. Magnus said he expects the dollar to weaken to $1.15 per euro in two weeks.
The dollar also fell for a third day against the yen, dropping to 119.52 yen from 120.51, and declined against 12 of the 16 most widely traded currencies.
Demand for dollars has slowed as analysts have pared their US profit estimates for the rest of the year. Second-quarter earnings at Standard & Poor's 500 companies are forecast to rise 6.4%, down from 11% on January 1, according to Thomson Financial.
"The economy is struggling; interest rates aren't going to go up in the US," Magnus said. "In that environment you chase yield and buy currencies such as the euro, Australian and Canadian dollars," he said. The euro has gained 4.5% versus the dollar this year.