The Dollar Index declined for a third day after Moody’s Investors Service put the U.S. under review for a credit downgrade, damping demand for the nation’s currency.
The greenback held yesterday’s loss against the euro after Federal Reserve Chairman Ben S. Bernanke said the central bank is prepared to take additional action, including buying more government bonds, to boost the economy. Japan’s currency slid about 1 yen per dollar within a few minutes at the start of London trading amid speculation the nation will intervene in markets to limit its gains. A report today may show U.S. retail sales dropped in July.
The Moody’s comments “reinforce the dollar-negative sentiment,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The dollar has staged quite a sharp reversal and the market is now on heightened quantitative-easing watch, which will leave the dollar vulnerable to weaker U.S. data,” he said.