US focus: Dollar drops on prospects for interest rates

The dollar fell for a 10th straight day, the longest slump in 17 years, after slower manufacturing growth reinforced speculation the Federal Reserve will maintain record-low rates.
Dollar index advanced earlier after the U.S. said al-Qaeda leader Osama bin Laden had been killed.
The euro gained to a 16-month high before the European Central Bank, which raised interest rates last month, meets this week. The Fed kept its rates on hold last week.
“You are now getting more interest-rate differentials between the euro and the dollar, and that’s going to continue,” said Fabian Eliasson at Mizuho Financial Group Inc.. “Unless the U.S. changes its policy, you’re still going to be leaning toward a weaker dollar.”
The Institute for Supply Management’s factory index was at 60.4 for April, slipping from 61.2 the previous month. Manufacturing expanded for a 21st straight month.
“Even though we’re still seeing fairly stronger growth in the U.S., it’s not as strong as it has been,” said David Mann at Standard Chartered Plc.
A widening interest-rate gap between America and the rest of the world may mean no rebound this year for the dollar.
The Fed is expected to hold its benchmark interest rate at zero to 0.25% benchmark interest rate, where it’s been since December 2008, until the first quarter of 2012, according to the weighted average forecast.
While a weaker dollar may signal waning confidence in the U.S., it also may help President Barack Obama reach his goal of doubling exports by 2015 and reducing unemployment.
The yen snapped two days of gains versus the euro after Obama said bin Laden was killed after a firefight at a house in Pakistan. Bin Laden was the architect of a radical Islamist movement that killed almost 3,000 people in the U.S. on Sept. 11, 2001, and recast global security and politics.