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Dollar Near One-Week Low Versus Euro Before Fed Bernanke

The dollar traded within 0.3 percent of its lowest in a week against the euro on speculation Federal Reserve Chairman Ben Bernanke will reiterate today that a slow U.S. recovery warrants near-zero interest rates.

The 17-nation euro neared a four-month high against the yen before reports this week forecast to show German services and factory output grew in March. Australia’s dollar fell for the first time in four days on concern slowing Chinese growth will dent demand for the South Pacific nation’s exports. New Zealand’s currency dropped as Asian stocks weakened, damping demand for higher-yielding assets.

“The Fed is not going to change their recent rhetoric on the economy and they’re going to still characterize the recovery as somewhat tepid,” said Andrew Salter, a strategist at Australia & New Zealand Banking Group Ltd. (ANZ) in Sydney. “The long-term trend that’s in place is U.S. dollar weakness.”

The dollar was at $1.3231 per euro as of 10:37 a.m. in Singapore from $1.3238 in New York yesterday, when it fell as low as $1.3266, the least since March 9. It fetched 83.48 yen from 83.35. The euro bought 110.46 yen from 110.34 after rising as high as 110.57 yesterday, the most since Oct. 31.

Bernanke said March 14 that a “frustratingly slow” recovery in the world’s largest economy was impeding efforts by banks to make profitable loans. Policy makers said the previous day that “elevated” unemployment and a subdued outlook for inflation warranted keeping borrowing costs “exceptionally low” at least through late 2014.

Dollar Declines

Bernanke will give the first of four lectures at George Washington University today and testify before a U.S. House committee about Europe’s debt crisis on March 21.

The dollar has declined 0.5 percent in the past week, the third-worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro has gained 0.8 percent and the yen declined 1.2 percent.

Liquidity in currency markets will be thin today due to a public holiday in Japan, UBS AG said in a research note.

Demand for the 17-nation euro may be bolstered before March 22 data from London-based Markit Economics that’s predicted to show manufacturing and services growth accelerated in Germany. Factory output climbed to 51 this month from 50.2 in February while a gauge of services rose to 53.1 from 52.8, according to the median estimate in Bloomberg News surveys of economists.

ANZ Bank’s Salter predicts the euro will climb to $1.35 by June and $1.37 by September. The currency will trade at $1.29 and $1.30, respectively, according the median forecast in a Bloomberg survey of analysts.

China Demand

The so-called Aussie retreated from near a 10-month high against the yen as BHP Billiton Ltd. (BHP), the world’s largest mining company, said steel growth in China has flattened off. China is Australia’s largest trading partner.

“There will be further risk that the Chinese economy will be slowing down” in a stronger deceleration than expected, said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “The Aussie is still a sell on rallies at the moment.”

The Australian dollar declined 0.4 percent to $1.0567 and weakened 0.2 percent to 88.23 yen. It yesterday reached 88.64, the most since May 3. The New Zealand dollar declined 0.3 percent to 82.40 U.S. cents and traded at 68.79 yen from 68.87 yesterday.

The MSCI Asia Pacific excluding Japan index of regional stocks fell 0.6 percent, set for its biggest decline in more than a week.

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