The dollar traded at almost a two- year high against the euro amid speculation an improving economy will give the Federal Reserve more reason to increase interest rates.
The greenback pared gains amid speculation it gained too much, too fast, and as U.S. Treasury yields fell. The currency jumped earlier as a private report showed U.S. companies added more than 200,000 workers for a sixth month. Australia’s dollar slid to an eight-month low after retail sales grew less than economists forecast. South Korea’s won dropped amid concern authorities will take steps to weaken the currency. The euro declined toward a two-year low as a report showed manufacturing in Germany unexpectedly contracted in September.
“In the relative world of currencies, everything seems to be dollar positive,” said Daragh Maher, a foreign-exchange strategist at HSBC Holdings Plc in London. “Not only is the market happy to debate how swiftly the first U.S. rate hike might arrive, but data disappointments elsewhere are driving a dovish mood for other currencies.”
The dollar advanced 0.1 percent to $1.2615 per euro at 8:39 a.m. New York time after gaining 0.4 percent earlier. It touched $1.2571 yesterday, the strongest level since September 2012. The greenback rose as much as 0.4 percent to 110.09 yen, the highest since Aug. 25, 2008, before trading at 109.67.
U.S. companies hired 213,000 workers in September, figures from the ADP Research Institute in Roseland, New Jersey, showed today. The median forecast of 41 economists surveyed by Bloomberg called for a September advance of 205,000. Estimates ranged from 160,000 to 255,000.
“You’ve got a combination of dollar strength and idiosyncratic yen weakness,” Peter Kinsella, a senior currency strategist at Commerzbank AG in London, said in an interview on Bloomberg Television’s “Countdown” with Mark Barton, Anna Edwards and Manus Cranny. “Over the next one or two years, getting toward 115-120 yen is very easily doable.”
Australia’s dollar slid versus all but one of its 16 major peers after the nation’s statistics bureau said retail sales grew 0.1 percent in August, compared with the median forecast for a 0.4 percent advance. The Aussie fell 0.6 percent to 86.92 U.S. cents and reached 86.63, the weakest since Jan. 24.
“Looking at the detail of the retail-sales report, it’s fairly weak,” said Jonathan Cavenagh, a Singapore-based currency strategist at Westpac Banking Corp. “It’s hard not to see the Aussie dollar making fresh lows. A test of the around-86.60 level seems like a pretty good chance on the back of this data.”
The euro slid for a second day against the dollar after a purchasing managers index of manufacturing in Germany, the euro area’s largest economy, fell to 49.9 last month, according to London-based Markit Economics. That’s the lowest level since June 2013 and below the 50 level that indicates expansion. Factory activity also contracted in France.
The euro has tumbled about 10 percent versus the dollar from a 2 1/2-year high reached in May as the ECB unveiled unprecedented stimulus, including purchases of asset-backed securities, to combat a slide in inflation. A weaker currency may suit central bank President Mario Draghi by making exports more competitive, as well as increasing consumer prices on higher import costs.
The ECB is forecast to keep interest rates unchanged at its meeting tomorrow, according to analysts surveyed by Bloomberg News, after unexpectedly dropping them to records on Sept. 4. Still, Draghi said Sept. 22 policy makers “stand ready to use additional unconventional instruments” if necessary.
The proportion of euro holdings in allocated official reserves dropped by 3.5 percent, the biggest decline since the first quarter of 2009, according to International Monetary Fund figures released yesterday. The euro’s share stood at 24.2 percent in the second quarter from 25 percent in the prior three months, while the dollar’s rose to 60.7 percent from 60.3 percent.
In South Korea, the won extended its 4.3 percent decline in the last quarter. The currency closed at 1,062.49 per dollar after touching 1,064.51, the weakest level in six months.
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