Dollar Declines to One-Year Low Versus Euro Before Fed Decision

Sept. 23 (Bloomberg) -- The dollar declined to a one-year low against the euro on speculation Federal Reserve policy makers will signal today this will keep interest rates low, diminishing the allure of U.S. assets.

The greenback fell versus 13 of its 16 major counterparts after a government report showed New Zealand’s economy unexpectedly expanded for the first time in six quarters, spurring investors to buy higher-yielding assets. The U.S. dollar also declined on concern Group of 20 leaders, meeting in Pittsburgh starting tomorrow, will call for a reduction in global trade imbalances that may cause further gains in the dollar’s counterparts.

“Our view is that the Fed won’t change its statement, so we’d be very surprised if they changed the reference to exceptionally low levels of the fed funds rate,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “We are broadly bearish on the dollar. The improving global picture tends to produce selling of the dollar.”

The dollar fell to $1.4809 per euro as of 9:15 a.m. in Tokyo from $1.4790 in New York yesterday, after earlier declining to $1.4842, the lowest level since Sept. 22, 2008. The U.S. currency dropped to 1.0220 Swiss francs, after earlier reaching 1.0189 francs, the weakest since July 22, 2008.

The yen climbed to 90.77 per dollar from 91.10, and rose to 134.38 per euro from 134.76. The New Zealand dollar advanced 0.9 percent to 66.06 yen, after earlier rising to 66.27 yen, the highest level since Oct. 6, 2008.

The Dollar Index, which the ICE uses to track the dollar against the currencies of six major U.S. trading partners, dropped to as low as 75.939, the weakest since Sept. 22, 2008, before trading at 75.986 from 76.118 yesterday.