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The dollar declined against a majority of the most-traded currencies as Brazil and Russia joined China in saying they would shift some $70 billion of reserves from U.S. Treasuries into multicurrency bonds.

The drop in the U.S. currency was the third weekly slump in four against the euro as concern increased that record debt sales and deficits will erode the value of the dollar. The British pound touched the strongest level since December versus the euro, after reports showed U.K. manufacturing rose in April, while the decline of housing prices slowed.

The dollar also declined as traders reduced their bets that the Federal Reserve will start raising its benchmark interest rate from a range between zero and 0.25 percent. Interest-rate futures yesterday indicated a 20 percent chance the Fed will boost its target rate for overnight lending between banks to at least 0.5 percent by its September meeting, compared with 49 percent odds a week earlier.

The dollar weakened after the Russian central bank’s first deputy chairman, Alexei Ulyukayev, said on June 10 that the nation Russia may switch reserves from Treasuries to International Monetary Fund bonds. Brazil’s Finance Minister Guido Mantega said his country will purchase $10 billion.

Leaders of Brazil, Russia, India and China, the so-called BRIC countries, are scheduled to meet on June 16 in Russia to discuss their economies.

Central banks’ dollar-selling may help weaken the greenback beyond $1.50 per euro before September, according to Thomas Stolper, a London-based economist at Goldman Sachs Group Inc. Goldman on June 9 advised its clients to buy the euro versus the dollar.

The dollar pared its weekly losses yesterday after Japanese Finance Minister Kaoru Yosano said his nation’s confidence in U.S. debt is “unshakable” and that the currency’s global status is safe.  Japan is the second-biggest foreign holder of Treasuries after China.
Source: bloomberg.com