“The Dollar Index (DXY) dropped to an eight- week low amid speculation the Federal Reserve will affirm its commitment to maintaining bond purchases when it announces its policy decision today.
The U.S. currency weakened for a fourth day against the euro before an industry report forecast to show America’s private employers added the fewest jobs in six months. The Fed is buying $85 billion of bonds a month as part of its quantitative-easing strategy to put downward pressure on borrowing costs. The pound strengthened after U.K. manufacturing shrank less than economists predicted last month. Australia’s dollar fell after Chinese manufacturing growth slowed.
“Into the Fed meeting I think that we’re going to see further U.S. dollar selling pressure,” said Hans-Guenter Redeker, head of global foreign-exchange strategy at Morgan Stanley in London. “The Fed is going to signal that it’s going to stay accommodative, that it’s going to reconfirm the link between unlimited quantitative easing and the state of the economy.”
The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, fell 0.2 percent to 81.58 at 7:01 a.m. in New York after dropping to 81.569, the lowest since Feb. 28.
The dollar declined 0.2 percent to $1.3191 per euro after depreciating to $1.32, the weakest level since April 17. The greenback was little changed at 97.53 yen. The euro strengthened 0.3 percent to 128.66 yen.
The U.S. currency may decline below 94 yen within the next three weeks, Morgan Stanley’s Redeker said.
