Dollar falls as increase in U.S. payrolls adds to risk appetite

The Dollar Index fell for a fourth day as a report showed hiring in the U.S. increased in January after accelerating more than previously estimated at the end of 2012, encouraging investors to seek higher-yielding assets.

The decline came two days after the Federal Reserve said it will keep buying bonds to spur economic growth and reduce unemployment, increasing concern the dollar is being debased. The greenback weakened earlier as risk appetite rose after data showed manufacturing in the 17-nation region shrank less in January than earlier estimated.

“It’s really a better-than-expected number,” Doug Borthwick, a managing director and head of foreign exchange at Chapdelaine FX in New York, said of the payrolls report in a telephone interview. “You have to look at the revision. This will be spun positively by the market.”

The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, declined 0.2% to 79.054 at 9:13 a.m. in New York.

The yen reached a 2 1/2 year low amid bets Prime Minister Shinzo Abe will select a new Bank of Japan governor who will boost monetary stimulus, and the euro topped $1.36 for the first time since Nov. 18, 2011.

Hiring in the U.S. increased in January after accelerating more than previously estimated at the end of 2012, data showed. Payrolls rose by 157,000 jobs following a revised 196,000 advance in the prior month and a 247,000 surge in November, Labor Department figures showed today in Washington. The revisions added a total of 127,000 jobs to the employment count in November and December.

Dollar Strength

“This number suggests that the trend for stronger employment growth in the States is intact,” Jack Spitz, Toronto-based managing director of foreign-exchange trading at National Bank of Canada, said in a telephone interview “It will likely lead to better U.S. dollar strength going forward” by encouraging the Fed to end monetary stimulus, he said.

The jobless rate rose to 7.9% , from 7.8%.

The dollar gauge dropped 1.2% on Aug. 3, when data showed employers added 163,000 jobs in July, exceeding a forecast of 100,000. It gained 0.2% Jan. 4, when a 155,000-position gain in the previous month narrowly beat a projection of 152,000.

The index climbed 0.6% on June 1 to touch a 21-month high of 83.542 as investors sought safety after the 69,000 positions that employers added in May failed to approach a Bloomberg survey forecast for 150,000.

Fed Purchases

The Fed said Jan. 30 it will keep purchasing $85 billion of Treasury and mortgage securities each month.

Central-bank Chairman Ben S. Bernanke and his Federal Open Market Committee colleagues are deploying record stimulus through an open-ended expansion of the central bank’s balance sheet after determining that the benefits from stoking a flagging economy outweigh any risk of financial instability or higher inflation.

The Fed repeated that its purchases will continue “if the outlook for the labor market does not improve substantially.” The central bank also left unchanged its statement that it planned to hold its target interest rate near zero as long as unemployment remains above 6.5% and projected inflation stays below 2.5%.

The euro strengthened yesterday as optimism increased that the worst is over in the 17-nation bloc’s sovereign-debt crisis.

Bloomberg News

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