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.
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.
Sweden’s krona was the worst-performing major currency against the dollar and the euro amid rising speculation the central bank will cut interest rates again at the end of the month. A survey showed Sweden’s services economy contracted in September, sinking at the fastest pace since August 2009.
The krona fell 1.1 percent to 6.6836 per dollar. It weakened 1 percent to 8.6202 per euro.
Australia’s dollar sank today after data showed the nation’s trade deficit for August was almost three times wider than the median forecast of economists. Imports exceeded exports by A$2.03 billion ($2.07 billion) in August, compared with a revised A$1.53 billion shortfall in July.
In China, Australia’s biggest trade partner, data today showed non-manufacturing industries grew at the weakest pace since at least March 2011, fanning speculation the Reserve Bank of Australia will lower interest rates again following a quarter-point reduction yesterday.
“The Reserve Bank will cut again probably next month,” said Joseph Capurso, a strategist at Commonwealth Bank of Australia in Sydney. “I don’t think the RBA will cut as much as the market is expecting, but those expectations have been one thing that has pushed the Aussie down.”
The Aussie dollar dropped as much as 0.7 percent to $1.0198, the weakest level since Sept. 6.
A composite index based on a survey of euro-area services and manufacturing purchasing managers fell to 46.1 from 46.3 in August, London-based Markit Economics said today. That’s above an initial estimate of 45.9 published on Sept. 20. A reading below 50 indicates contraction.
ECB officials meet tomorrow in Ljubljana, Slovenia, with policy makers forecast to keep the bank’s benchmark interest rate unchanged at a record-low 0.75 percent, according to a Bloomberg survey of economists.
The euro remained higher against most major peers even after Spanish Prime Minister Mariano Rajoy yesterday denied immediate plans to ask for a bailout in response to mounting speculation that a request was imminent.
The shared currency has strengthened 1.6 percent in the past month, according to Bloomberg Correlation Weighted Indexes. The dollar declined 1 percent and the yen slid 1.3 percent.
The yen fell against the dollar and euro before the Bank of Japan begins its policy meeting tomorrow. Officials expanded the Japanese central bank’s asset-purchase program last month in a bid to stimulate economic growth.
Japan’s new Economy Minister Seiji Maehara this week pledged a closer watch over the BOJ to ensure it meets its 1 percent inflation goal, adding that purchases of foreign bonds may be a powerful tool for easing.
The dollar may climb toward its highs in August and September versus the yen, MacNeil Curry, New York-based chief rates and currencies technical strategist at Bank of America Corp. wrote in a report yesterday.
A break above resistance at 78.18 to 78.24 “reinvigorates the uptrend” for dollar-yen, Curry wrote. Resistance is a level where orders to sell may be clustered. The greenback peaked at 79.66 yen on Aug. 20 and rose to as high as 79.22 on Sept. 19, according to data compiled by Bloomberg.