The dollar fell against the euro as consumer confidence dropped this
month to a 15-year low and housing prices plunged in April, reducing
speculation the Federal Reserve will increase borrowing costs later
this year.
The U.S. currency weakened as the central
bank started a two-day meeting at which it's forecast to keep the
target lending rate at 2 percent, the lowest level in more than three
years. The yen depreciated to an 11-month low versus the euro on
speculation Japanese investors will use summer bonuses to buy overseas
assets offering higher yields than at home.
``Our
short-term outlook is for dollar weakness,'' said Benedikt Germanier,
an analyst at UBS AG in Stamford, Connecticut. ``After today's data,
the Fed has no reason to talk hawkish tomorrow.'' The dollar may drop
to $1.60 per euro within a month, he said.
Crude oil
rose for a third day as the weaker dollar enhanced the appeal of
commodities as an inflation hedge. Crude oil for August delivery
increased as much as 1.5 percent to $138.75 a barrel.
Futures
contracts on the Chicago Board of Trade show a 34 percent chance the
Fed will increase the target rate for overnight lending between banks
by at least a quarter-percentage point at its August meeting, down from
47 percent odds a week ago. The chance of an increase to 2.25 percent
tomorrow is 12 percent, compared with 16 percent a week ago.
The
U.S. Conference Board reported that its confidence index dropped to
50.4 in June from a revised 58.1 in May. The gauge reached the lowest
level since February 1992.
The dollar has gained 1.5
percent against the euro this quarter as traders bet the economic
slowdown sparked by the collapse of the subprime-mortgage market will
spread to Europe as the U.S. recovers. This year, the dollar is down
6.9 percent.