Dollar Falls on Prospects Fed Will Repeat Pledge for Low Rates

Nov. 17 (Bloomberg) -- The dollar fell a third day against the euro on speculation Federal Reserve officials will today reiterate the central bank’s pledge to keep interest rates near zero to support economic growth.

The yen was poised to drop against its major counterparts before a report today forecast to show U.S. industrial output advanced in October for a fourth month, damping demand for Japan’s currency as a refuge. The euro climbed against the yen as Asian stocks extended a global rally, boosting demand for higher-yielding assets.

“The dollar will continue to be used as a funding currency amid rising risk appetite,” said Yoh Nihei, trading group manager at Tokai Tokyo Securities Co. in Tokyo. “The mainstream trend remains intact. The Fed will keep low rates for a while.”

The dollar fell to $1.4994 per euro at 9:06 a.m. in Tokyo from $1.4970 yesterday in New York. The euro rose to 133.53 yen from 133.33 yen. The dollar fetched 89.03 yen from 89.05 yen. Yesterday it touched 88.76, the lowest level since Oct. 9.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback’s value against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, fell 0.6 percent to 74.894 in New York yesterday. It touched 74.679, the lowest level since August 2008.

Federal Reserve Chairman Ben S. Bernanke said yesterday in a New York speech that the Fed “will help ensure that the dollar is strong and a source of global financial stability.” Economic “headwinds” of weak lending and labor markets will probably restrain the pace of the U.S. economic recovery, warranting a continuation of low borrowing costs.

‘Selling Pressure’

“The dollar will remain under selling pressure after Bernanke stated that the market has got it wrong when it comes to the timing of the implementation of the Fed’s exit strategy, implicitly suggesting that the Fed still sees substantial risks to the economic rebound,” analysts led by Hans-Guenter Redeker, London-based global head of currency strategy at BNP Paribas SA, wrote in a research note yesterday.

Richmond Fed President Jeffrey Lacker will speak on the economic outlook to the annual retreat meeting of the state’s House Appropriations Committee in Richmond, Virginia today. Cleveland Fed President Sandra Pianalto is set to speak at the 11th Annual Ohio Housing Conference in Columbus, Ohio today.

The yen was set to fall as economists surveyed by Bloomberg News forecast factory output in the U.S. probably rose 0.4 percent in October after gaining 0.7 percent in September. The Federal Reserve’s report is due today.

The Nikkei 225 Stock Average rose 0.4 percent, and the MSCI Asia Pacific Index of regional shares advanced 0.3 percent. The Standard & Poor’s 500 Index rose 1.5 percent in New York yesterday.