Dollar is 'ugliest' after third weekly decline versus euro

The dollar fell against all of its most-traded counterparts as Federal Reserve officials made statements encouraging speculation the central bank will increase purchases of US debt to keep interest rates low.

The greenback declined for the third consecutive week against the euro to a six-month low as rhetoric from the Fed damped demand for US assets. Asian currencies and the Australian and New Zealand dollars had five-day gains against the US dollar as investors searched for higher yields. The yen strengthened 1.1 per cent against the dollar as Japanese officials said they are prepared to sell more of the nation's currency to prevent a return to a 15-year high.

"The dollar seems to be the ugliest girl at the dance," said Lane Newman, director of foreign exchange at ING Groep NV in New York. "The main catalyst for dollar weakness would be communication from the Federal Open Market Committee this week that quantitative easing is on the table and the euro has gone from the worst currency to own to the best on the back of 'anything but the big dollar." The dollar declined 2.2 per cent to $1.3790 per euro, the weakest level since March 17, from $1.3492 last week. The euro was the strongest weekly performer against major currencies.

Yen gains
The US currency weakened to 83.27 yen, from 84.21 yen the previous week. It touched 83.16 yen yesterday, the lowest level since Japan intervened in foreign-exchange markets on September 15. The euro advanced 1 per cent to 114.81 yen, from 113.62 yen.

The greenback fell against the euro for the fourth straight day yesterday as 9 out of 45 economists revised up their fourth quarter euro projections against the dollar, pushing the median forecast for the pair to $1.30, from $1.29 the week before.