Dollar rises to 2-month high versus yen on Fed bets

The dollar strengthened to a two-month high against the yen (FOREX:USDJPY) as signs the world’s largest economy is gathering momentum boosted the appeal of the U.S. currency.

The greenback rose versus the majority of its 16 major peers as a gauge of national business activity improved in September and after payroll gains last week topped forecasts. The yen declined before the government releases its quarterly economic-growth data on Thursday. The pound dropped to the lowest in two months versus the dollar after U.K. inflation slowed more than forecast. Sweden’s krona slumped.

“It’s a continuation of broad dollar strength across the board,” Fabian Eliasson, head of U.S. currency sales in New York at Mizuho Financial Group Inc., said in a phone interview. “The dollar has been outperforming other currencies in the wake of last week’s number. We’re still sort of riding the coattail of that into this week.”

The dollar rose 0.5% to 99.69 yen at 9:28 a.m. in New York after advancing to 99.80 yen, the strongest level since Sept. 13. It last touched 100 yen on Sept. 11. The U.S. currency fell 0.2% to $1.3435 per euro. The yen weakened 0.7% to 133.93 per euro.

The Bloomberg U.S. Dollar Index, which monitors the greenback against 10 major counterparts, rose 0.1% to 1,022.17 after reaching 1,025.01, the highest since Sept. 13.

Pound Falls

The pound fell for a third day versus the dollar and euro as the National Statistics Office said annual consumer-price inflation slowed to 2.2% last month from 2.7% in September. That’s less than the 2.5% rate predicted in a Bloomberg News survey.

The Bank of England publishes new economic forecasts in its quarterly Inflation Report tomorrow. Policy makers have pledged to hold their key interest rate at a record low as long as inflation expectations remain anchored to their 2% goal.

“Interest-rate expectations are going to be pared back after the inflation data,” said David Bloom, global head of currency strategy at HSBC Holdings Plc in London. “This has put sterling on the back foot.”

The pound dropped 0.6% to $1.5900 after falling to $1.5855, the lowest level since Sept. 13. Sterling slid 0.8% to 84.48 pence per euro.

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