The dollar fell for the first time in four days against the euro and
declined versus the pound on speculation a U.S. housing slump and a
seizure in credit markets will tip the world's largest economy into
recession.
Federal Reserve Chairman Ben S. Bernanke will testify at the House Budget Committee on the economic outlook and financial markets at 1400GMT in
Washington today. A rebound in U.S. growth won't happen right away as
the government tries to unfreeze credit markets roiled by losses on
mortgage derivatives, he said on Oct. 15.
``Pessimistic comments on the economy could knock the dollar lower,''
said Masanobu Ishikawa, general manager of foreign exchange at Tokyo
Forex & Ueda Harlow Ltd., Japan's largest currency broker.
``There's a good chance the U.S. is in a recession.''
Economists surveyed by Bloomberg in the first week of October said U.S.
gross domestic product contracted at a 0.2 percent annual pace in the
three months through September and will shrink at a 0.8 percent rate in
the final quarter of the year. Declines in consumer spending will tip
the economy into a recession, the survey showed.
The U.S. index of leading indicators fell 0.1 percent last month as
rising unemployment encouraged consumers to spend less, according to
the median estimate in a separate Bloomberg survey before the
Conference Board report at 1400GMT. The index, a gauge of the economy's
direction in the next three to six months, has posted only two monthly
gains this year.
Interest-rate futures show a 100 percent chance the Fed will lower its
1.5 percent target lending rate by at least a quarter-percentage point
when the central bank announces its next policy decision on Oct. 29.
That compares with no odds for a rate cut one month ago.