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Dollar Has Biggest Slide in Two Weeks on Asset-Demand Concerns
Kosuke Goto in Tokyo, Ron Harui in Singapore


April 17 (Bloomberg) -- The dollar had its biggest slide against the euro and yen in about two weeks on speculation U.S. reports will suggest economic growth isn't strong enough to sustain overseas investors' demand for U.S. assets.

A U.S. report today will indicate foreigners, who hold more than half of outstanding Treasuries, reduced the value of assets they bought in February, according to economists surveyed by Bloomberg. The U.S. needs to attract more than $2 billion a day to counter a current-account deficit that's running at a record. Separate reports may show slowing production and housing starts.

``The dollar really needs very strong economic figures to get momentum,'' said Masaki Fukui, a senior market economist and currency analyst in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan's second-largest lender by assets. ``I can hardly see such strong data coming out.''

The currency fell to 118.23 yen as of 1:16 p.m. in Tokyo from 118.69 on April 14 in New York. The U.S. currency fell to $1.2188 per euro from $1.2110. It will move between 116.50 and 119.50 yen and $1.2050 and $1.23 per euro this week, Fukui said.

Fifty-one percent of the 55 traders, strategists and investors Bloomberg surveyed on April 13 from Sydney to New York advised selling the dollar against the yen.

Overseas investors bought $60 billion of U.S. assets in February, down from $66 billion in January, according to economists Bloomberg surveyed last week. The data is due today.

`Now Short'

``The amount of U.S. assets bought by Asian investors is now short of the total U.S. trade deficit with Asia, especially with Japan,'' said Philip Wee, a senior market strategist at DBS Group Holdings Ltd. in Singapore. DBS forecasts the dollar will fall to 108 yen by the end of the year, he said.

A deficit in the current- or trade accounts means more of a country's currency needs to be converted to pay for imports, while a surplus means the opposite. The U.S. trade deficit was running at $65.7 billion in February, close to a record $68.6 billion reached in January, according to a report on April 12.

The deficit with Japan widened to $13.5 billion in February, from $13.0 billion a year earlier, the Commerce Department said.

The dollar fell for three years through 2004, partly on a growing current-account deficit, the broadest measure of trade. It rebounded against the euro and yen last year as increases in interest rates in the U.S. added to the extra yield available on the country's assets over those of Europe and Japan.

The Federal Reserve Bank of New York's general economic index for April, due today, fell to 24.3 from 31.2 in March, the median estimate in a survey of 37 economists showed. A number above zero signals a higher percentage of manufacturers in the state reported an improvement in business than a deterioration.

Cool Data

Builders probably broke ground on new U.S. homes at an annual rate of 2.03 million last month, down from February's 2.12 million, based on a Bloomberg survey of 49 economists. The report is scheduled for release tomorrow.

The dollar is being supported by prospects Federal Reserve officials due to speak today will add to speculation that they will increase interest rates at least twice more this year.

Fed vice chairman Robert Ferguson and Jack Guynn, president of the Fed Bank of Atlanta, will speak at a conference today at the Atlanta Fed at 8:30 a.m. Michael Moskow, Fed Bank of Chicago president, speaks in Des Moines, Iowa, at 12:15 p.m. local time.

``If there are hawkish remarks'' today, the dollar will strengthen, said Nobuaki Tani, a currency dealer at Resona Bank Ltd., a unit of Japan's fourth-largest lender by assets. Tani said the dollar may today move between 118.00 yen and 118.80 yen and the euro between $1.2100 and $1.2200.

China Holdings

U.S. interest-rate futures show traders have fully priced in that the Fed will lift rates to 5 percent at a May 10 meeting. The odds of another move at a June 29 meeting are 58 percent.

The Fed has raised its target rate for overnight lending 15 times since June 2004. The Bank of Japan has held rates near zero percent since 2001. The European Central Bank on March 2 lifted its benchmark a second time in four months to 2.5 percent.

The dollar also fell today after Cheng Siwei, vice chairman of China's Standing Committee of the National People's Congress, or parliament, said yesterday the country should slowly reduce U.S. debt holdings and increase imports from the U.S. instead.

``We should gradually increase imports to reduce the large surplus between U.S.-China and gradually buy less U.S. debt,'' Cheng said in Beijing.

President Hu Jintao is facing demands to let the Chinese yuan appreciate from the U.S., where the currency will top the agenda of his April 20 meeting with President George W. Bush in Washington, said Masafumi Yamamoto, currency strategist at Nikko Citigroup Ltd. in Tokyo and a former trader at the Bank of Japan.

The dollar will move between 116 yen and 119 yen this week, Yamamoto said.

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