Dollar rises vs. major peers as outlook dims in Europe, U.S.

The dollar rose against most major peers amid demand for safety as euro-area services and manufacturing output contracted and the U.S. prepared to issue a report forecast to show the unemployment rate rose.

The greenback extended a gain versus the yen after a private report showed U.S. employers added fewer workers last month. The European Central Bank meets tomorrow. Australia’s dollar slid to the least in almost a month after the nation had its widest trade deficit since 2008 and data showed China’s services industry expanded the least in more than a year.

“The numbers that have come out of the U.S., Europe and China over the last two weeks have been, on balance, disappointing,” Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon Corp., said in a telephone interview. “The market is beginning to price a further downgrade in the outlook for each of those three regions.”

The dollar rose 0.4 percent to 78.50 yen at 10:07 a.m. New York time and touched 78.54 yen, the highest since Sept. 19. It gained 0.2 percent to $1.2896 per euro. The 17-nation currency rose 0.3 percent to 101.22 yen.

The Dollar Index, which tracks the U.S. currency against those of six major trading partners, rose 0.3 percent to 79.97, snapping a two-day decline.

Low Volatility

Implied volatility, which signals the expected pace of currency swings, was at almost a five-year low. It was 7.78 percent, after touching 7.73 percent on Sept. 28, the least since October 2007, a JPMorgan Chase & Co. index for the currencies of Group-of-Seven nations showed. Lower volatility makes investments in currencies with higher benchmark lending rates more attractive because the risk in such trades is that market moves will erase profit.

Private employers in the U.S. increased payrolls by 162,000 workers in September following a revised 189,000 jump in August, figures from Roseland, New Jersey-based ADP Employer Services showed today. The median forecast of 38 economists surveyed by Bloomberg projected a 140,000 advance.

A U.S. Labor Department report on Oct. 5 may show private payrolls increased by 128,000 in September and unemployment rose to 8.2 percent from 8.1 percent the prior month, according to a Bloomberg survey. The jobless rate has been stuck above 8 percent since February 2009.

The dollar remained higher versus most major counterparts even after the Institute for Supply Management’s index of U.S. non-manufacturing businesses, which covers about 90 percent of the economy, rose. It increased to 55.1 in September from the prior month’s 53.7, the Tempe, Arizona-based group said today. A Bloomberg News survey forecast 53.4.

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