Dollar Declines to Five-Week Low Versus Euro on Fed Outlook

The dollar fell to a five-week low against the euro on speculation the Federal Reserve will seek to bring down unemployment by introducing another round of bond purchases, debasing the currency.

The U.S. currency declined versus all but one of its 16 major counterparts after policy makers said yesterday the benchmark interest rate would stay low until at least late 2014, pushing back a previous date of mid-2013. The Canadian dollar strengthened to parity with the greenback for the first time since November. Australia’s dollar rose to the strongest since October as Russia said it may start buying the currency.

“The dollar has been getting sold across the board rather heavily since the Fed’s announcement,” said Neil Jones, head of European hedge fund sales at Mizuho Corporate Bank Ltd. in London. “The headlines were quite dovish and these affected the market, with the impulse reaction being to sell dollars.”

The dollar fell 0.3 percent to $1.3145 per euro at 7:01 a.m. in New York after sliding to $1.3175, the weakest level since Dec. 21. The U.S. currency dropped 0.2 percent to 77.64 yen. The euro was little changed at 102.04 yen after rising to 102.17 yen, the strongest since Dec. 23.

The Fed’s Open Market Committee “recognizes the hardships imposed by high and persistent unemployment in an underperforming economy, and it is prepared to provide further monetary accommodation,” Chairman Ben S. Bernanke said yesterday at a press conference in Washington.