By Neeraj Gangal
Purchases of existing homes in US decreased 5% in May, the weakest since November
The dollar fell against a majority of its most-traded peers before a report forecast to show home sales dropped in May to this year’s low, keeping pressure on the Federal Reserve to maintain its accommodative policy.
The US currency weakened versus the euro before Fed policy makers begin a two-day meeting amid signs the world’s largest economy is losing momentum. The euro advanced as European leaders reassured investors a Greek default can be avoided and before data tomorrow forecast to show industrial orders in the region rose in April. Australia’s dollar fell after Reserve Bank minutes showed policy makers thought it “prudent” to keep rates unchanged amid concern about Europe.
“The problems of the US far exceed Europe’s despite all the focus on Greece and the peripheral economies,” said Grant Turley, a senior currency strategist at Australia & New Zealand Banking Group Ltd. in Sydney. “The Fed doesn’t look like it’s going to be in a position to raise rates well into 2012, and that will keep the US dollar under pressure.”
The dollar fell to $1.4334 per euro as of 12:41 p.m. in Tokyo from $1.4304 in New York on Monday. The currency traded at 80.17 yen from 80.25. The euro fetched 114.92 yen from 114.80.
Purchases of existing homes decreased 5 percent to a 4.80 million annual rate in May, the weakest since November, according to the median forecast of economists surveyed by Bloomberg News before today’s report. April home prices fell 0.3 percent, the Federal Housing Finance Agency will say tomorrow, according to projections in a separate survey.
Fed Vice Chairman Janet Yellen said June 9 that a “long, drawn-out recovery” was likely for the US housing market. “For its part, the Federal Reserve will continue to use its policy tools to support the economic recovery,” she said.
Futures on the Chicago Board of Trade show the likelihood the Fed will increase its target rate by March 2012 dropped to 21 percent from 30 percent a month ago. The Federal Open Market Committee has kept its benchmark rate unchanged between zero and 0.25 percent since December 2008.
The euro fell for a second day against the Swiss franc before a vote of confidence in Greek Prime Minister George Papandreou’s government around midnight in Athens. He called for the vote last week after opposition parties rejected pleas for national consensus and the prime minister’s handling of the crisis led to defections from his party.
The euro declined to 1.20884 francs from 1.21063 yesterday after touching a record low of 1.19466 per euro on June 16.
Greece needs parliamentary approval of a €78bn package ($112bn) of budget cuts to ensure the payment of a fifth loan under last year’s €110bn bailout.
“My attitude towards the euro is still very cautious,” said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp., Australia’s second-largest lender. “If the Greek government survives the vote of confidence and we do get a move higher in the euro, I like selling the euro.”
The shared currency rallied yesterday after Jean-Claude Juncker, who leads the group of euro-area finance ministers, said Papandreou assured him the Greek government would do everything to ensure delivery of financial aid.
European industrial orders rose 1 percent in April after slipping 1.6 percent the previous month, the European Union’s statistics office is forecast to say tomorrow according to the median estimate in a Bloomberg survey.
Australia’s dollar declined against all major counterparts after its central bank said domestic data had not added “any urgency” to the need for policy adjustment, according to minutes released today of the June 7 meeting.
The Reserve Bank “highlights risks in the global economy and the euro-zone debt crisis, but at the same time, they note fairly firm growth in terms of domestic wages and further tightening needed at some point,” said Mitul Kotecha, head of global foreign-exchange strategy in Hong Kong at Credit Agricole SA. “The market was quite long on risk currencies and risk appetite. That’s one of the reasons why perhaps we are seeing some profit-taking on this.”
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