By James Ramage
The dollar fell broadly on Friday, capping its second
consecutive weekly decline, on the latest sign that the U.S.
economy is losing momentum.
The Wall Street Journal Dollar Index, which tracks the
greenback's value against a basket of 16 currencies, slumped 0.4%
to 86.42 on Friday, on track to close at a seven-week low. The
index is down 0.4% for the week and is 3.3% off its 12-year high on
March 13.
U.S. orders for durable goods, excluding the volatile
transportation categories, fell 0.2% in March, decreasing for a
sixth straight month, the Commerce Department said Friday. That
comes on the heels of downbeat readings on new-home sales, retail
sales and industrial production.
This flurry of indicators pointing to a soft patch in U.S.
growth has damped investors' enthusiasm for the dollar, which had
soared in recent months on expectations that the Federal Reserve
was poised to raise the benchmark short-term interest rate for the
first time since 2006. Higher rates make currencies more attractive
for investors.
But now investors are skeptical about the timing of any rate
increase given the dimming outlook. That takes some of the shine
off the dollar.
"We haven't seen the rebound in the data people have been
looking for, which is being reflected in the dollar," said Vassili
Serebriakov, currency strategist at BNP Paribas.
As a group, money managers have pared bullish dollar bets for
four straight weeks, according to the U.S. Commodity Futures
Trading Commission. The value of bets on a dollar appreciating
against other currencies fell 5.1% to a four-month low of $37.2
billion for the week ended April 21. Although futures-market bets
represent a small share of the currency market, analysts view them
as an accurate proxy of how investors are positioned.
Investors will be eyeing a statement from the Fed's policymaking
committee on Wednesday, and will be looking for clues on the
possible timing of a rate increase. But this meeting doesn't
involve a tweaking of economic forecasts or a news conference by
Fed Chairwoman Janet Yellen, so it has "little room to shock the
market," said Shahab Jalinoos, currency research analyst at Credit
Suisse.
Also on Wednesday, the Commerce Department is scheduled to
report a preliminary reading for first-quarter growth.
Next week investors will also be looking to indicators on
inflation, consumer confidence and manufacturing.
On Friday, trading in fed-funds futures, an instrument used to
bet on Fed policies, suggested that investors see a 56% likelihood
of the Fed raising rates in December, according to CME Group. One
month ago, investors saw a 57% chance of a rate increase in
October. On Friday, the odds on an October increase were 42%.
While the headline number on durable-goods orders beat
expectations, currency investors focused on underlying weakness.
Orders for company spending on equipment and software slid 0.5%,
falling for the seventh month in a row.
The dollar slid 0.4% against the euro, with one euro buying
$1.0867 and remaining in a trading range that's held since early
March. The dollar retreated 0.6% versus the yen to 118.90 yen. The
U.S. currency has traded between 118 yen and 122 yen since early
February.
Despite the recent weakness, many market watchers expect the
dollar to eventually resume its rise.
"Because we're holding these [trading] ranges, that tells us
people still predict the dollar will strengthen over the longer
term," Mr. Serebriakov said.