Dollar Near Three-Week Low Against Euro on Fed Rate Outlook

Jan. 12 (Bloomberg) -- The dollar traded near a three-week low against the euro on speculation the Federal Reserve will maintain its policy of keeping interest rates low to spur a recovery in the world’s largest economy.

Australia’s currency was near the strongest in seven weeks against the greenback before a government report that economists said will show employers in the nation added jobs in December for a fourth month. The dollar has weakened versus 15 of the 16 major currencies this year as futures traders cut bets the Fed will raise borrowing costs by its June meeting on signs the U.S. labor market remains weak.

“Investors are happy to sell U.S. dollars, and I think that will carry on for at least a couple more weeks,” said Phil Burke, chief dealer for global foreign exchange at JP Morgan Securities Australia Ltd. in Sydney. “Growth currencies are still looking good.”

The dollar was at $1.4488 per euro as of 9:36 a.m. in Tokyo from $1.4513 in New York yesterday, when it declined to $1.4557, the weakest level since Dec. 16. The U.S. currency traded at 92.21 yen from 92.09. The euro bought 133.62 yen from 133.64 yen.

Futures on the Chicago Board of Trade showed a 32 percent chance the U.S. central bank will raise its target rate for overnight bank loans by at least a quarter-percentage point by June, down from 51 percent odds a week earlier.

Jobless Claims

U.S. initial jobless claims rose to 435,000 in the week ended Jan. 9 from 434,000 the prior week, according to the median estimate of economists in a Bloomberg News survey before the Labor Department’s Jan. 14 report.

U.S. companies cut 85,000 jobs in December after a revised addition of 4,000 positions in the previous month, the Labor Department said on Jan. 8. The median estimate of economists in a Bloomberg survey was for no change.

The euro advanced against the dollar yesterday on speculation investors will increase carry trades, in which they buy higher-yielding assets with amounts borrowed in nations with low interest rates. The U.S. benchmark rate of zero to 0.25 percent has made the dollar popular for funding such transactions. The European Central Bank’s main refinancing rate is 1 percent.

“Higher risk appetite is encouraging demand for ‘growth- sensitive’ currencies like the euro and Australian and New Zealand dollars at the expense of the greenback,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “If the tone of global data continues to portend an improving growth picture for 2010, we’d expect these currencies to again outperform this week.”

Australian Dollar

The Australian dollar traded near the highest against since September 2008 against the yen before the statistics bureau releases its employment report on Jan. 14. The number of people employed in Australia rose 10,000 in December after gaining 31,200 in November, according to the median estimate of economists in a Bloomberg news.

Australia’s dollar traded at 92.85 U.S. cents from 92.96 cents in New York yesterday, when it touched 93.26 cents, its highest since Nov. 18. The currency was at 85.55 yen from 85.60 yesterday, when it climbed to 86.21, the strongest since Sept. 29, 2008. New Zealand’s dollar was at 73.97 U.S. cents from 74.14 cents. It bought 68.29 yen from 68.28 yen.

Japan’s current-account surplus widened to 1.1 trillion yen ($11.9 billion) in November from a year earlier, the Finance Ministry reported today in Tokyo. Economists surveyed by Bloomberg News forecast for 1 trillion yen.