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The Dollar index was headed for its biggest monthly decrease since September as a slowing U.S. economy encouraged the Federal Reserve to maintain stimulus.
“There’s a perception out there that a weak dollar might well be good for the U.S. economy in the short term, given some signs of softer growth,” said Alan Ruskin at Deutsche Bank AG. “The market really took Bernanke as a green light to weaken the dollar further.”
“With the extraordinary weakening of the dollar this week, people are taking profit in quiet market conditions,” said Carl Forcheski at Societe Generale SA.
The Swiss franc and Australian dollar rallied to records against the greenback amid signs of accelerating inflation.
The franc appreciated against the dollar as Swiss National Bank President Philipp Hildebrand said that price stability may be threatened by higher commodity prices and expansionary monetary policy. Switzerland’s leading economic indicator unexpectedly increased in April, signaling the economy is gaining momentum.
The Australian dollar extended its biggest monthly gain this year and reached a record as Treasurer Wayne Swan said the currency’s strength reflects the improving economy and higher commodity prices.
Consumer prices in Australia increased 1.6% last quarter from the previous three months, the biggest jump since 2006.
The dollar dropped for a ninth day versus the euro to the weakest level since December 2009.
Economic growth slowed to a 1.8% annual rate last quarter from 3.1% in the prior three months, the Commerce Department reported yesterday.
Bernanke signaled on April 27 in his first press conference following a policy decision that the central bank will likely continue reinvesting maturing debt after its $600 billion program of bond buying expires in June as planned.
The euro was poised for a fifth monthly gain on speculation the European Central Bank will increase borrowing costs further while Federal Reserve Chairman Ben S. Bernanke said this week he was unsure when U.S. monetary stimulus will unwind.
Inflation in the 17-nation euro region quickened to 2.8% in April.
China’s yuan strengthened beyond 6.5 per dollar for the first time since 1993. The currency gained for a third day on speculation the central bank will let its currency appreciate faster to curb accelerating inflation.
Consumer prices in Asia’s biggest economy rose 5.4% in March from a year earlier, the most since July 2008.
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