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Dollar, Yen Decline as Gain in U.S. Private Payrolls Boosts Risk Appetite
The dollar and yen fell against most major counterparts as U.S. private employers added more jobs than forecast in August, easing concern the recovery in the world’s biggest economy is slowing and fueling risk appetite.
The euro touched a two-week high versus the greenback as overall U.S. employment declined by about half of the amount forecast in a Bloomberg survey. The Canadian dollar was the top performer among the most-traded currencies as investors sought assets linked to growth. The Swiss franc, considered a haven currency, fell against most counterparts. The yen pared losses after data showed slower growth in U.S. service industries.
“The market has taken this quite positively,” said John McCarthy, director of currency trading at ING Groep NV in New York. “Risk sentiment has improved dramatically.”
The dollar depreciated 0.5 percent to $1.2894 per euro at 4:36 p.m. in New York, from $1.2825 yesterday, and touched $1.2897, the weakest level since Aug. 19. It dropped 1 percent for the past five days, its second weekly loss.
The yen slipped 0.1 percent to 84.37 per dollar, from 84.28, trimming a third weekly gain to 1 percent. It touched 83.60 on Aug. 24, the strongest level since 1995. Japan’s currency slid 0.7 percent to 108.83 per euro, from 108.09, little changed for the week.
Stocks climbed, with the Standard & Poor’s 500 Index rising 1.3 percent in its fourth straight daily advance.
“The economic numbers have been bad as of late, so the double-dip recession idea has been gaining ground -- today’s number changes that,” said Tim O’Sullivan, chief trader at FOREX.com, a unit of the online currency trading firm Gain Capital in Bedminster, New Jersey.
Fourth Daily Gain
Europe’s shared currency rose for a fourth day against the dollar, the longest winning streak in five weeks, as Labor Department figures showed payrolls excluding those of government agencies climbed 67,000, after a revised 107,000 increase in July that was more than initially estimated. The median estimate in a Bloomberg News survey was a gain of 40,000 private positions. Overall payrolls shed 54,000 jobs, compared with a forecast for a drop of 105,000.
The Canadian dollar climbed 1.4 percent to C$1.0382 per U.S. dollar. New Zealand’s dollar, another growth-linked currency and the No. 2 performer today, rose 0.9 percent to 72.08 U.S. cents.
The yen and dollar were lower against most major counterparts even after the Institute for Supply Management’s index of U.S. non-manufacturing businesses, which covers about 90 percent of the economy, fell to 51.5 in August from 54.3 the prior month. A decline to 53.2 was forecast in a Bloomberg survey. Readings greater than 50 indicate expansion.
Swiss Franc
The franc fell 0.9 percent to 1.3106 per euro. The Swiss currency touched its strongest ever against the shared currency, 1.2852, three days ago.
The euro rose earlier today against the yen after data showed European retail sales gained for a third month in July, rising 0.1 percent. The euro area’s economy will probably expand between 1.4 percent and 1.8 percent this year, the European Central Bank said yesterday. That’s up from a previously forecast range of between 0.7 percent and 1.3 percent.
The yen has strengthened 14 percent this year in the biggest gain among 10 developed-world counterparts as investors sought it as a refuge, Bloomberg Correlation-Weighted Currency Indices show. The euro has dropped 9.2 percent, the weakest performance, and the dollar is up 2.1 percent.
Yen Intervention
Japan’s currency fell earlier today versus Asian counterparts after Ichiro Ozawa, a candidate in a party election this month that will decide Japan’s prime minister, said intervention to stem the yen’s gains is a possibility. Central banks intervene in foreign-exchange markets by buying or selling currencies to influence exchange rates.
Ozawa, head of the largest faction in the ruling Democratic Party of Japan, is challenging Prime Minister Naoto Kan at a party leadership contest Sept. 14. Japan hasn’t intervened in the foreign-exchange market since 2004.
The U.S. jobs data decreased speculation the Federal Reserve will need to resume quantitative easing, the large-scale purchase of debt, to bolster the economy.
Some Fed officials said at an Aug. 10 policy meeting the central bank would need to consider ways to add monetary stimulus “if the outlook were to weaken appreciably further,” according to meeting minutes released this week.
“The stronger non-farm payrolls report will reduce the pressure on the Federal Reserve to implement additional quantitative easing,” Kathy Lien, director of currency research at online currency trader GFT Forex in New York, wrote in a note to clients. “Given the global impact of the U.S. recovery, everyone around the world will be cheering this report.”
Mexico’s peso gained for a third day against the greenback after the jobs report in the U.S., its biggest trading partner. The currency added 0.7 percent to 12.9385 per dollar and touched 12.9047, the strongest level in more than a week.
To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Mary Childs in New York at mchilds5@bloomberg.net
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