The dollar fell to the lowest in almost four weeks against the euro in Asia after the Federal Reserve yesterday said a ``measured'' pace may be adopted for interest rate increases. ``There's nothing stronger in the statement, and that's why the dollar has been sold,'' said Noriyoshi Tsunoda, assistant manager of the treasury department in Taipei at Mizuho Corporate Bank Ltd., a unit of Japan's biggest lender. ``The dollar rose before the meeting on speculation of a hawkish statement.''
The Fed yesterday left its key interest rate at a four- decade low of 1 percent, half that of the European Central Bank. Policy makers suggested they are still months away from lifting the benchmark rate, even as they dropped the word ``patient'' to describe how long they can wait to adjust monetary policy. Against the euro, the dollar was at $1.2113 at 12:53 p.m. in Singapore from $1.2100 late yesterday in New York, when it had its biggest drop in two months, according to EBS, an electronic foreign-exchange dealing system. It reached $1.2140, its weakest since April 8. The U.S. currency was at 109.44 yen from 109.34. ``The Fed is signaling it is thinking about raising interest rates if the data continue to come in on the strong side,'' wrote Merrill Lynch & Co. economists David Rosenberg and Kathy Bostjancic in a note to clients. ``Once they do start to raise rates, it will be much more gradual than the markets have priced in.'' The Fed will stay on hold for the rest of this year, the report said.
Adding Jobs
``With inflation low and resource use slack, the committee believes that policy accommodation can be removed at a pace that is likely to be measured,'' members of the rate-setting Open Market Committee said in a statement following their meeting in Washington. The dollar may still gain later on speculation a report on Friday will show the world's biggest economy in April added the second-most jobs in a month since 2000. The economy created 170,000 jobs in April, the Labor Department will probably say on Friday, according to the median of 73 forecasts in a Bloomberg survey. There were 308,000 new jobs in March, the most in four years. ``Hiring appears to have picked up,'' the Fed said in its statement. ``The number is really going to confirm the trend, which is modest employment growth,'' said Clifford Bennett, chief strategist at FxMax, a Sydney-based currency forecasting company. ``Steady, modest employment growth, that's all Greenspan is looking for. The U.S. dollar will be firming again.''
ECB
The euro rose on speculation ECB President Jean-Claude Trichet tomorrow may suggest the bank will raise interest rates this year to contain inflation amid growing signs of an economic recovery in the dozen nations sharing the currency. Service industries, the largest part of the economy, probably expanded for a 10th month in April, according to economists surveyed by Bloomberg News before the figure scheduled for release today. The rate of inflation in the euro zone increased to 2 percent in April from 1.7 percent in March, according to a preliminary estimate released Friday by the European Union's statistics office. The ECB tries to keep the annual rate of consumer price increases below 2 percent. Policy makers at the central bank will announce rates tomorrow.
Well-Rooted Economy
``The recovery is fairly well rooted,'' said Lee Boon Keng, a market strategist in Singapore at DBS Group Holdings Ltd., Southeast Asia's biggest bank. Any reference to inflation by Trichet will suggest ``the next move by the ECB could potentially be a rate hike, rather than a rate cut. That's going to be extremely supportive for the euro.'' An index based on a survey of 2,000 purchasing managers compiled for Group Plc by NTC Research Ltd. may have risen to 55 from March's 54.4, the median of 27 forecasts in a Bloomberg News survey showed. A reading above 50 indicates an expansion. The report will be published at 9 a.m. London time.
The euro gained to 132.52 yen from 132.30. It yesterday rose as high as 132.95, its strongest against the Japanese currency since March 19. The central bank will keep its benchmark interest rate at 2 percent, all 34 economists predicted in a Bloomberg News survey. ``In the second half of the year, once the economy picks up, it might be that the ECB will raise rates,'' Hans-Werner Sinn, president of Germany's Ifo economic institute, said yesterday in Berlin. ///www.bloomberg.com