The dollar gained versus most major peers amid speculation Federal Reserve Chairman Ben S. Bernanke will reduce the central bank’s monetary stimulus program as the economy gains.
The yen (FOREX:USDJPY) fell for a second day against the dollar on bets Group-of-20 finance ministers and central bankers meeting this week will endorse Bank of Japan monetary easing designed to stoke inflation to 2%. The greenback remained higher versus the yen and euro after claims for jobless benefits in the U.S. fell. Bernanke speaks to the Senate today after telling a House panel yesterday he would take a wait-and-see stance on slowing stimulus.
“People haven’t really changed their view of when tapering is going to occur,” Dan Dorrow, head of research at Faros Trading LLC in Stamford, Connecticut, said of the U.S. data in a telephone interview. “The Fed has said we really need to have cumulative data. We’re in Bernanke mode right now.”
The dollar (NYBOT:DXU13) advanced 0.8% to 100.40 yen at 10:08 a.m. New York time and touched 100.53. It appreciated 0.3% to $1.3087 per euro in a second daily advance. The 17-nation currency gained 0.6% to 131.42 yen and reached 131.47.
The greenback increased its gain versus the yen after the Philadelphia Fed’s general economic index increased to 19.8 in July, more than double the forecast of 8 in a Bloomberg survey, from 12.5 the prior month. Readings greater than zero signal expansion in the region.
Bernanke, who’s due to deliver his semi-annual report on monetary policy to the Senate Banking Committee at 10:30 a.m. in Washington, said told the House Financial Services Committee yesterday the Federal Open Market Committee wants to assure that the U.S. economy and labor markets have sufficient momentum before reducing asset purchases.
Australia’s dollar declined versus all of its 16 most- traded counterparts after a report showed the nation’s businesses turned pessimistic about near-term prospects, adding to the case for an interest-rate cut next month by the central bank. The currency decreased 0.7% to 91.70 U.S. cents after earlier falling 1.1%, the most in almost a week.
South Africa’s rand declined for the first time in five days after the International Monetary Fund said growth in China, the biggest buyer of South African raw materials, may trail forecasts. The currency weakened 0.3% to 9.8531.
JPMorgan Chase & Co.’s Global FX Volatility Index, a measure of currency fluctuations, slid to 9.97%, the lowest on an intraday basis since June 5. It reached a one-year high of 11.96% on June 24.
Bernanke told U.S. lawmakers yesterday that if the economy improved faster than expected, and inflation rose back “decisively” toward the central bank’s 2% target, “the pace of asset purchases could be reduced somewhat more quickly.” The Fed would also be prepared to increase the pace of its bond purchases -- currently at $85 billion a month -- “for a time, to promote a return to maximum employment in a context of price stability,” he said.
U.S. jobless claims dropped by 24,000 to 334,000 in the week ended July 13, the fewest since early May, from a revised 358,000 the prior period, Labor Department figures showed today in Washington. The median forecast of 49 economists surveyed by Bloomberg projected 345,000. The recent swings reflect the difficulty in adjusting the data for the timing of annual retooling shutdowns at automakers, a spokesman said.
The number of people continuing to receive jobless benefits climbed by 91,000 to 3.11 million in the week ended July 6, the most in five months.
“The dollar is generally very well bid,” said Adam Cole, head of Group-of-10 currency strategy at Royal Bank of Canada in London. “The market expectation that the tapering announcement will come in September still looks sensible and nothing Bernanke said yesterday changed that.”
Investors may need to wait to benefit from betting on a stronger dollar, according to Jeremy Stretch, head of currency strategy in London at Canadian Imperial Bank of Commerce, the fifth-most accurate currency forecaster in a Bloomberg Rankings survey for the second quarter.
“It will be the case that over the next two or three months we may continue to oscillate within ranges,” Stretch said in an interview on Bloomberg Television’s “The Pulse” with Guy Johnson. “As we go toward the end of this quarter or beginning of next quarter, as we do get into better data or the prospect of a degree of tapering, that’s the time we’ll see the dollar gaining additional traction.”
The Bloomberg Dollar Index, which tracks the greenback against 10 other major currencies, rose 0.3% to 1,035 after increasing 0.2% yesterday.
The yen weakened for the fourth time in five days against the greenback after Russian Deputy Finance Minister Sergei Storchak said the G-20 probably won’t call for a tapering of stimulus in nations including Japan.
The BOJ doubled monthly bond purchases to more than 7 trillion yen in April after Prime Minister Shinzo Abe urged the central bank to take steps to overcome deflation. Polls have shown Abe’s Liberal Democratic Party and coalition partners are likely to win a majority in the upper house election this weekend, ending a split parliament.
Japan’s currency lost 22% in the past year, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, as Abe and BOJ Governor Haruhiko Kuroda pursued a policy of monetary accommodation to boost the Japanese economy. The euro strengthened 8.8% and the dollar gained 1.4%.
The euro touched a seven-week high versus the yen as Greek lawmakers passed a bill that puts thousands of state workers on notice for possible dismissal, a victory for Prime Minister Antonis Samaras that clears the way for the country’s next bailout installment.