The Dollar Index climbed to the highest level since 2010 after U.S. employers added more jobs than forecast in June, fueling bets the Federal Reserve will begin slowing unprecedented monetary stimulus.
The U.S. currency rose versus most major peers. The dollar gauge, which IntercontinentalExchange Inc. uses to track the greenback versus currencies of six major U.S. trade partners, has gained 4.7% since June 18, the day before Fed Chairman Ben S. Bernanke said the central bank may begin cutting bond buying this year if growth meets officials’ forecasts. European Central Bank President Mario Draghi pledged yesterday to keep rates at a record low for an extended period.
“These are really strong numbers, and there was an expected strong dollar response across the board,” Dan Dorrow, head of research at Faros Trading LLC in Stamford, Connecticut, said in a telephone interview. “This suggests tapering sooner rather than later because the cumulative strong momentum is there.”
The Dollar Index climbed 1.5% to 84.483 at 9:02 a.m. in New York. It jumped as much as 1.6%, the biggest intraday gain since November 2011, to 84.530, the highest level since July 13, 2010.
The dollar appreciated 0.7% to $1.2824 per euro and touched $1.2809, its strongest level since May 17. The greenback rose 1% to 101.08 yen after reaching 101.14, the highest since May 31. The Japanese currency declined 0.3% to 129.53 per euro.
U.S. payrolls rose by 195,000 workers for a second straight month, the Labor Department reported today in Washington. The median forecast in a Bloomberg survey projected a 165,000 gain after a previously reported 175,000 increase in May. The jobless rate stayed at 7.6%, while hourly earnings in the year ended in June advanced by the most since July 2011.
Payrolls have increased by an average of 189,000 jobs each month this year through May, Labor Department data show. They grew in 2011 and 2012 by an average of 179,000 a month.
The Dollar Index fell 0.2% on April 5 when the Labor Department said employers added 88,000 workers the previous month, less than half a Bloomberg survey projection for an increase of 190,000 positions, fueling speculation U.S. growth was slowing.
The currency gauge climbed 0.8% on March 8 when data showed employers added 236,000 jobs in February, compared with a Bloomberg forecast for 165,000.
The Fed is buying $85 billion of Treasuries and mortgage bonds every month to put downward pressure on borrowing costs during the third round of its quantitative-easing stimulus program. It purchased $2.3 trillion of assets from 2008 to 2011 in the first two rounds.
Bernanke said last month after a two-day Federal Open Market Committee meeting the central bank may reduce the purchases this year and end them in mid-2014 if economic growth meets policy makers’ projections. Fed officials forecast expansion of as much as 2.6% this year and 3.5% in 2014.
The Commerce Department reported June 26 U.S. gross domestic product expanded at a revised 1.8% annualized rate from January through March, down from a prior estimate of 2.4%.
Policy makers have also kept the key interest-rate target at zero to 0.25% since 2008 to support the economy. A rate increase is “far in the future,” Bernanke said June 19.
The Fed has said it will keep the rate at almost zero as long as unemployment remains above 6.5% and the outlook for inflation doesn’t exceed 2.5%. Asset purchases may continue in 2014 until unemployment declines to about 7%, Bernanke said last month.