The dollar declined for a third consecutive week against the euro, the longest losing streak in two months, as the U.S. housing slump and record crude oil prices slow growth in the world's largest economy.
``There's no turn in sight for the housing market,'' said
Tom Fitzpatrick, global head of currency strategy at Citigroup Global
Markets Inc. in New York. ``Higher oil prices effectively become a
tax. It takes away the spending power from consumers, and it's a drag
on growth.''
The dollar fell 1.2 percent this week to $1.5762 per
euro yesterday, from $1.5577 on May 16. It touched $1.5814 on May 22,
the weakest level since April 24. The U.S. currency fell 0.7 percent
to 103.38 yen, compared with 104.04 a week earlier. The euro gained
0.5 percent to 162.95 yen, from 162.27.
The greenback declined
against 13 of the 16 most-traded currencies this week, including 2.4
percent against the Swiss franc and 1.7 percent versus the New
Zealand dollar, as oil touched a record $135.09 a barrel on May 22.
The U.S. is the world's biggest importer of oil. Oil closed at $132
Friday.
The correlation coefficient between oil prices and the
euro dollar exchange rate has been 0.95 for the past year, indicating
they have moved in the same direction 95 percent of the time.
Sales
of previously owned homes in the U.S. declined 1 percent to a 4.89
million annual rate in April, and were down 18 percent from a year
earlier, the National Association of Realtors said yesterday. Reports
next week will show new home sales dropped to a 17-year low, and
consumer confidence, as measured by the New York-based Conference
Board, was the weakest since 1993.
``If the economy disappoints,
and oil prices remain high, then that's clearly a risk for the
dollar,'' said Nick Bennenbroek, head of currency strategy at Wells
Fargo Bank in New York, in an interview on Bloomberg Television. ``It
will delay even further the recovery of the greenback.''
The U.S.
currency has lost 14 percent against the euro in the past 12 months
as the Federal Reserve slashed its benchmark interest rate to 2
percent, from 5.25 percent in September. The European Central Bank
has kept its target rate at 4 percent.
Minutes from the Fed's
April meeting released this week indicated the bank probably won't
lower borrowing costs further. Officials voiced concern inflation may
accelerate, and most thought the cut to 2 percent last month was a
``close call,'' the minutes showed.
Futures on the Chicago Board
of Trade indicated a 40 percent chance the Fed will increase the
target rate for overnight lending between banks by a
quarter-percentage point in December. There's a 92 percent chance
policy makers will hold the rate at 2 percent at their next meeting
on June 25.
The U.S. currency also dropped versus the yen and
fell to a 25-year low against the Australian dollar. The Chinese
yuan posted its biggest weekly increase this year on signs the
country's officials are accelerating the currency's gains to curb
rising prices.