The U.S. economy is gaining momentum after the Federal Reserve said last month it will keep interest rates near zero through late 2014.
InterContinentalExchange Inc.'s Dollar Index, which tracks the currency versus six U.S. trading partners, fell 0.6 percent on the month. The dollar weakened against 15 of its 16 major counterparts tracked by Bloomberg.
"There are signs that the U.S. economy is improving, the labor market in particular," Ian Lyngen, a government-bond strategist at CRT Capital Group LLC in Stamford, Connecticut, said Feb. 24 in a telephone interview. "The Fed has committed to providing an exceptional amount of policy stimulus for the foreseeable future. The issues in Europe, while not completely resolved, are seeing progress made toward dealing their sovereign credit crisis."
The yen depreciated 6.1 percent against the dollar, a sign Bank of Japan Governor Masaaki Shirakawa's inflation goal is succeeding where record intervention failed. The yen fell against all of its 16 major counterparts this month, dropping 7.7 percent against nine developed-nation currencies, according to Bloomberg Correlation-Weighted Currency Indexes.
The currency plunged to a seven-month low after the BOJ, which has struggled for more than a decade against deflation, said on Feb. 14 it aimed for 1 percent yearly gains in consumer prices and would add 10 trillion yen ($124 billion) to the economy. Traders are paying record premiums for options to buy the dollar against the yen for three, six and 12 months. Bullish bets on Japan's currency have fallen by almost half.