Dollar drops to 15-month low even as Geithner reiterates administration’s strong dollar stance

Dollar falls to 15-month low despite US support

NEW YORK — The dollar dropped to a new 15-month low as the the euro rose above $1.50 Wednesday morning, even as Treasury Secretary Timothy Geithner reiterated the administration’s stance that a strong dollar is good for the U.S. economy.

Geithner, in a speech in Tokyo on his way to a summit of Asian finance ministers in Singapore, also said low interest rates and other government supports for the economy were still needed.

The expectation that the Federal Reserve will keep the key U.S. interest rate near zero has been weighing on the dollar. Higher interest rates make a currency more attractive for investors, since bets made in that currency can earn higher returns.

In morning trading in New York, the 16-nation euro rose to $1.5026 from $1.4978 late Tuesday. The British pound fell to $1.6665 from $1.6737, and the dollar edged up to 89.80 Japanese yen from 89.77 yen.

The dollar also slipped to 1.0047 Swiss francs from 1.0081 francs, and fell to 1.0455 Canadian dollars from 1.0496 late Tuesday.

Against a basket of six major currencies, the dollar hit a 15-month low of 74.775.

“The momentum and the conviction that the Fed will not raise rates any time soon, coupled with the fact that the major central banks continue to provide liquidity liberally” means the “fundamental force” weighing on the dollar will persist, said Brown Brothers Harriman analyst Marc Chandler in a research note Wednesday.

Federal Reserve officials speaking late Tuesday noted that the economic recovery is likely to be weak and reiterated that the central bank will keep rates low.

One official even suggested that the first rate hikes could be delayed until 2011.

“Any perception the Fed will keep rates lower for even longer will pressure the dollar,” said UBS analyst Geoffrey Yu.

Investors around the world are viewing the dollar as weaker than other currencies because of low U.S. interest rates and huge budget deficits. They’re using it for what’s known as “carry trade” — traders borrowing dollars to make investments in emerging-market currencies, oil or equities. That bet weighs on the dollar.