Reply #116: Dollar Falls to 3-Year Low Versus Yen as Fed Cites Trade Boost

[Ghost Dog]

Feb. 29 (Bloomberg) -- The dollar fell to the lowest level in three years versus the yen and touched the weakest ever against the euro on signs the Federal Reserve sees the currency's decline as helping the U.S. economy.

The U.S. currency dropped below 104 yen, to its cheapest level since March 2005, after Fed Chairman Ben S. Bernanke said the depreciating currency helps cut the trade deficit. The slide deepened as a report showed Chicago-area business shrank this month, fueling bets on a bigger Fed interest-rate cut in March.

``It's broad dollar weakness because of concerns about the U.S. economy, U.S. yields, expectations of rate cuts and financial markets,'' said Tom Fitzpatrick, global head of currency strategy at Citigroup Inc. in New York. ``They don't care about the weak dollar. I absolutely believe the market is disappointed'' by Bernanke's comment.

The dollar fell as low as 103.83 yen, then settled at 103.98 yen at 2:53 p.m. in New York, from 105.37 late yesterday and 107.17 a week ago. Today's drop was its biggest in six weeks. It touched $1.5239 per euro, the weakest since the euro's inception in 1999. It then recovered to trade at $1.5187, from $1.5193 yesterday. The dollar will weaken to $1.55 in coming weeks, Fitzpatrick said.

The U.S. currency lost 2.2 percent against the euro this month, the most since September. The euro is 30 percent above its debut level of about $1.17 in 1999, and is up 84 percent from an all-time low of 82.30 U.S. cents in 2000.

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