Dollar Trades Near 3-Week Low on Outlook for Fed’s Target Rate

Nov. 19 (Bloomberg) -- The dollar traded near a three-week low against the euro on speculation a Federal Reserve official today will reiterate the central bank’s pledge to keep interest rates near zero to support growth.

The U.S. currency may weaken before a government report today forecast to show manufacturing in the Philadelphia region expanded for a fourth month, boosting demand for higher-yielding assets. The euro was poised to gain against the yen on prospects a European Central Bank official tomorrow will signal the central bank is moving closer to ending its stimulus measures.

“Fed officials have made it clear low rates will be in place for a while, locking the dollar in a downtrend,” said Tetsuya Inoue, chief researcher for financial markets and technology studies at Nomura Research Institute. “It will take a long time before the Fed decides to exit.”

The dollar traded at $1.4953 per euro as of 9:11 a.m. in Tokyo from $1.4963 yesterday. It fell to $1.5048 on Nov. 11, the weakest level since Oct. 26. The yen was at 89.36 per dollar from 89.32. The euro fetched 133.59 yen from 133.64 yen.

Fed Bank of St. Louis President James Bullard said yesterday in St. Louis that past experience indicates policy makers may not start to raise interest rates until early 2012. Bullard will be a voting member of the Federal Open Market Committee next year.

Dallas Fed President Richard Fisher will speak at the Cato Institute’s 27th Annual Monetary Conference, “Restoring Global Financial Stability” in Washington today.

Philadelphia Fed

The Federal Reserve Bank of Philadelphia will report today that its economic index rose to 12.2 this month from 11.5 in October, according to the median estimate of economists in a Bloomberg News survey. A positive reading signals expansion.

The euro may strengthen before ECB council member Axel Weber speaks tomorrow at a Frankfurt European Banking Congress entitled “After the crisis.”

“My expectation is still that the ECB will hike rates before the Fed does,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “They certainly got the yield advantage and I don’t think that is going to change anytime soon. I’m definitely bullish on the euro.”

Weber earlier said that missing the right time to exit from fiscal and monetary stimulus measures increases the risk of further turmoil.

It’s necessary to “start preparing for an exit,” Weber said on Nov. 16. “If the right time for the exit is missed, there is a risk that new distortions emerge.”