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Reply #6: Dollar Has Biggest Weekly Drop Since November [View All]

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Melissa G Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Sep-02-05 10:26 PM
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6. Dollar Has Biggest Weekly Drop Since November
Dollar Has Biggest Weekly Drop Since November on Fed Rate View

Sept. 2 (Bloomberg) -- The dollar had its largest weekly decline since November against the euro on speculation the Federal Reserve will pause in its campaign of interest rate increases.

Destruction from Hurricane Katrina, surging oil prices and signs of slowing economic growth led traders to bet the Fed will raise its benchmark rate only one more time this year. The U.S. currency's 8.2 percent advance against the euro this year was partly driven by a widening rate advantage over Europe.

``If you look at interest rate differentials versus a lot of the key economies, they're no longer moving in the dollar's favor,'' said Daniel Katzive, a currency strategist in Stamford, Connecticut at UBS Securities LLC. ``I don't think the dollar will have an easy time recovering.''

Lehman Brothers Inc. and Bear Stearns & Co. economists reduced their forecasts for third-quarter economic growth, citing damage from Katrina. Lehman cut its prediction to 3.8 percent from 4.1 percent and Bear Stearns lowered its forecast to 3.5 percent from 4.5 percent.

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