Dollar rises versus yen in longest run this month

Index at four-month high

The dollar rose for a third day against the yen, its longest run of gains this month, before U.S. reports that economists say will show claims for jobless benefits fell and a measure of manufacturing increased.

The Bloomberg Dollar Spot Index climbed to a four-month high, making up losses suffered after a Jan. 10 report that showed job creation unexpectedly slowed last month. Data from Australia showed employers cut jobs, sending the nation’s currency to its weakest since August 2010 versus the greenback. The Turkish lira dropped to a record, while the South African rand slipped for a fourth day to the weakest since October 2008.

“It’s still broadly a constructive backdrop for the dollar, particularly against those emerging-market currencies, which are reliant on hot-money inflows,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “The U.S. recovery story and the tapering debate continue and ultimately that suggests the dip we saw in the dollar” made it attractive, Stretch said, referring to the Federal Reserve’s reduction in monetary stimulus.

The dollar gained 0.2 percent to 104.73 yen at 10:48 a.m. London time, after having risen 1.5 percent in the previous two sessions. It fell 0.1 percent to $1.3618 per euro. The 18-nation currency rose 0.3 percent to 142.64 yen.

The Bloomberg Dollar Spot Index, which measures the currency against 10 major counterparts, rose 0.1 percent to 1,030.83 after rising to 1,032.01, the highest since Sept. 9.

U.S. Recovery

Initial jobless claims in the U.S. fell to 328,000 in the period ended Jan. 11, the fewest since November, according to the median estimate of economists surveyed by Bloomberg News before the Labor Department report today. The 74,000 gain in payrolls reported by the Labor Department last week was the smallest increase since January 2011 and smaller than the most pessimistic projection in a Bloomberg survey of 90 economists.

Analysts in a separate survey estimate the Philadelphia Fed’s general economic index rose to 8.7 this month from a revised 6.4 in December. Readings greater than zero signal growth in the area, which covers eastern Pennsylvania, southern New Jersey and Delaware.

The Fed in its Beige Book business survey released yesterday said that growth in December was buoyed by gains in holiday spending by consumers, an improving labor market and strength in manufacturing.

Economy Prospects

Prospects that the U.S. economy will strengthen convinced Nomura Securities Co., Japan’s largest brokerage, to raise its year-end forecast for the dollar versus the yen to 114 from 110.

“The main performer in the coming months will be the U.S. dollar as economic outperformance becomes more pronounced,” currency strategists including Jens Nordvig wrote in a note yesterday. “We are penciling in further significant yen weakness.”

The yen has fallen 13.4 percent in the past year, the biggest loss after the Aussie’s 15 percent drop, according to Bloomberg Correlation Weighted Indexes, which track 10 developed-nation currencies. The euro has strengthened 7.4 percent and the dollar advanced 4.5 percent.

In Australia, jobs decreased by 22,600 last month, following November’s revised 15,400 gain, the statistics bureau said today. That compares with a 10,000 increase predicted by economists. The unemployment rate held at 5.8 percent, the highest in four years.

Aussie Bets

The market-implied probability that the Reserve Bank of Australia will reduce its record-low benchmark interest rate by July rose to 43 percent from 24 percent yesterday, swaps data compiled by Bloomberg show.

“We continue to estimate the fair value of the Aussie in the low-to-mid 80s,” said David Forrester, a senior vice president for Group-of-10 foreign-exchange strategy at Macquarie Bank Ltd. in Singapore. “The RBA will maintain an easing bias but it will want to sit back and let the Aussie dollar do some of the work.”

Australia’s dollar slid 1.5 percent to 87.87 U.S. cents after falling to 87.77, the weakest since August 2010. The Aussie dropped 1.1 percent to NZ$1.0571 after trading at NZ$1.0567, the lowest since December 2005.

Turkey’s lira dropped as much as 1 percent to 2.2124 against the dollar, before trading 0.7 percent weaker at 2.2056. The rand fell 0.3 percent to 10.9089, having depreciated to 10.9610.

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