Dollar Trades Near Week Low on Optimism Recession Is Abating

Aug. 20 (Bloomberg) -- The dollar traded near a one-week low against the euro on speculation economic data will add to signs the global recession is easing, prompting investors to seek higher-yielding assets.

The dollar fell against 11 of its 16 major counterparts before a report forecast to show an index of U.S. economic indicators rose for a fourth consecutive month. The yen declined against all 16 major counterparts on expectations Europe’s manufacturing and service industries contracted at a slower pace. The pound traded near a one-week high against the dollar on economist estimates that U.K. retail sales gained in July for a second month, signaling the recession is easing.

“It’s more of stabilization rather than a turnaround at this point,” said Katie Dean, senior economist in Melbourne at Australia & New Zealand Banking Group Ltd. “We could see a small move in terms of risk trade. The Aussie is going to be a little bit higher, the euro higher and the U.S. dollar weaker.”

The dollar traded at $1.4254 per euro at 8:58 a.m. in Tokyo from $1.4224 in New York yesterday, when it fell 0.6 percent. Europe’s currency was at 134.13 yen after touching 132.20 yesterday, the lowest level since July 22. The yen was at 94.12 per dollar from 94.08. It gained 0.6 percent yesterday and touched the strongest level since July 23.

The euro may advance to as high as $1.4320 by the end of this week, Dean said.

Sterling was at $1.6557 from $1.6529. It’s near the highest level since Aug. 14 when it touched $1.6608. The Australian dollar gained versus the dollar for a third day to 83.04 U.S. cents from 82.87.

Benchmark interest rates of 3 percent in Australia and 2.5 percent in New Zealand compares with as low as zero in the U.S. and 0.1 percent in Japan, making the South Pacific nations’ assets attractive to investors seeking higher returns.

U.S. Outlook

The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, was at 78.45 from 78.48 yesterday.

The dollar fell against the euro for a third day as economists surveyed by Bloomberg News said the Conference Board’s gauge of the U.S. economic outlook for the next three to six months increased 0.7 percent last month after advancing at the same rate in June. The New York-based research group will report the data today.

The composite index of manufacturing and service industries in Europe probably climbed to a year-high 48 this month from 47 in July, according to a separate survey. The index is based on a survey of purchasing managers by Markit Economics and a reading below 50 indicates a contraction. The data will be released tomorrow.

U.K. retail sales gained 0.4 percent last month after rising 1.2 in June, according to a survey of economists. The Office for National Statistics is expected to release the data today in London.