June 13 (Bloomberg) -- The Dollar Index slid to its lowest level in almost four months on speculation the Federal Reserve won’t raise lending rates even if it elects to taper bond-buying monetary stimulus.
The yen gained against the greenback, extending its largest three-day gain since 2010, as the Nikkei 225 Stock Average entered a bear market, spurring demand for less-risky assets. The greenback fell even as U.S. retail sales rose more than forecast in May. The euro rose versus the dollar for a fourth day as European Central Bank Executive Board member Yves Mersch expressed uncertainty about employing negative interest rates.
"The market got ahead of itself in early June, looking for ECB interest rate cuts and U.S. Fed tapering," said Douglas Borthwick, a managing director and head of foreign exchange at Chapdelaine FX in New York. "This continues to be supportive for the euro-dollar, and negative for the Dollar Index."
The yen gained 0.7 percent to 95.37 per dollar at 5:02 p.m. in New York, after appreciating to the strongest level since April 3. The currency’s 3.5 percent three-day advance was the biggest since May 2010. The yen added 0.4 percent to 127.56 per euro. The euro rose 0.3 percent $1.3375, after climbing to the highest since Feb. 13.
The Dollar Index, which Intercontinental Exchange Inc. uses to monitor the greenback against the currencies of six U.S. trade partners, fell 0.3 percent to 80.674 after reaching the lowest level since Feb. 19.
The measure extended its a loss after the Wall Street Journal reported that the Fed may push back on expectations of a rate increase. It briefly rebounded earlier today after retail sales in the U.S. rose 0.6 percent, exceeding the median forecast of 0.4 percent from 83 economists surveyed by Bloomberg. The increase was the biggest in three months and followed a 0.1 percent gain in April.
Fed policy makers next meet on June 18-19. Chairman Ben S. Bernanke said on May 22 the central bank could reduce its monthly purchases of $45 billion of Treasuries and $40 billion of mortgage-backed securities if the employment outlook shows a sustainable improvement.
The Nikkei fell 6.4 percent to 12,445.38. after touching the gauge’s lowest level since April 4.