Dollar Extends Advance Versus Euro After U.S. Adds More Jobs Than Forecast
Dollar Strengthens as U.S. Payrolls Climb More Than Forecast
Chris Ratcliffe/Bloomberg
The dollar fell versus the euro this week after the Federal Reserve said Nov. 3 it will buy $600 billion in Treasuries through June in a strategy called quantitative easing that pumps money into the U.S. economy and debases the dollar.
The dollar fell versus the euro this week after the Federal Reserve said Nov. 3 it will buy $600 billion in Treasuries through June in a strategy called quantitative easing that pumps money into the U.S. economy and debases the dollar. Photographer: Chris Ratcliffe/Bloomberg
Nov. 5 (Bloomberg) -- John Silvia, chief economist at Wells Fargo Securities LLC, talks about the October U.S. employment report released today and the outlook for the economy. Payrolls climbed 151,000, exceeding all estimates in a Bloomberg News survey of economists and following a revised 41,000 drop the prior month that was smaller than initially estimated, Labor Department figures showed. The jobless rate held at 9.6 percent. Silvia speaks with Margaret Brennan on Bloomberg Television's "InBusiness." (Source: Bloomberg)
The dollar advanced from near a nine- month low versus the euro as a government report showed U.S. employers added more jobs than forecast last month, increasing payrolls for the first time since May.
The common currency retreated against 15 of its 16 major counterparts after data showing European retail sales unexpectedly fell and Spain’s economy stagnated revived concern that so-called peripheral countries will struggle to plug budget gaps. Federal Reserve Chairman Ben S. Bernanke said an acceleration in U.S. economic growth would support the value of the U.S. dollar compared with other currencies.
“We’re back to where good news from the U.S. is actually good for the dollar,” said Win Thin, a senior currency strategist at Brown Brothers Harriman & Co. in New York. “If growth starts to pick up in the U.S., then inflation fears come back up and that becomes a little more dollar-supportive.”
The dollar advanced 1.3 percent to $1.4032 per euro at 5 p.m. in New York, from $1.4207 yesterday. It touched $1.4282 yesterday, the weakest level since Jan. 20, and lost 0.6 percent for the past five days. The greenback gained 0.6 percent to 81.26 yen, from 80.75 yen yesterday, and rose for the first week since the five days ended Sept. 17, gaining 1.1 percent. The euro declined 0.6 percent to 114.04 yen, from 114.71.
Payrolls climbed by 151,000 jobs, beating the 60,000- position median forecast of economists surveyed by Bloomberg News, after a revised 41,000 drop in September, Labor Department data showed in Washington. Private payrolls that exclude government agencies also gained more than forecast, swelling by 159,000 positions, while the jobless rate held at 9.6 percent.
Fed Purchases
The dollar fell versus the euro earlier this week after the Fed said Nov. 3 it will buy $600 billion in Treasuries through June in a strategy called quantitative easing to spur employment and avert deflation.
The greenback, which has dropped 13 percent versus the yen this year amid speculation the U.S. would debase its currency with debt purchases, could be nearing a bottom, according to Kathy Lien, director of currency research at online currency trader GFT Forex in New York.
“A true bottom in the U.S. dollar will not occur until we see a consistent improvement in non-farm payrolls that encourages the Fed to pare back their quantitative-easing program,” Lien wrote in a note to clients.
Bernanke said the Fed’s asset-purchase plan is targeted at bringing about a more rapid U.S. recovery.
“The best fundamentals for the dollar will come when the economy is growing strongly,” the central-bank chief said today in response to questions from college students in Jacksonville, Florida. “A strong U.S. economy is critical not just for Americans but for a global recovery,” he added.
Bets Against Euro
The euro’s one-month 25-delta risk-reversal rate against the dollar -- the premium of put options over calls -- dropped below minus 1 percent for the first time since Sept. 14, falling as much as 0.24 percentage point and signaling investors are betting on a weaker common currency. A delta is the change in the value of an option for each dollar change in the market price of an underlying asset.
Peru’s sol had its biggest weekly gain in three months as the Fed’s bond-purchase plan lifted commodity prices and fueled demand for higher-yielding, emerging-market currencies. The sol gained 0.2 percent to 2.7925 per dollar, from 2.7985 on Oct. 29.
More Explaining Needed
China said the U.S. central bank needs to further explain its decision to pump more money into the world’s biggest economy or risk undermining the global recovery.
“Many countries are worried about the impact of the policy on their economies,” Vice Foreign Minister Cui Tiankai said at a press briefing in Beijing today.
Cui’s remarks echoed concerns raised across Asia as countries brace themselves for stronger currencies and possible asset-price inflation as the greenback weakens.
The Canadian dollar was worth more than its U.S. counterpart for the first time since Oct. 14 after the U.S. jobs data and a report showing Canada’s employers added 3,000 positions last month. The currency, nicknamed the loonie, traded at C$1.0004 per greenback after strengthening to as much as 99.92 Canadian cents, from C$1.0022 yesterday.
The greenback fell yesterday as the European Central Bank signaled it will likely stick with its stimulus-exit strategy even as the Fed buys Treasuries to spur the U.S. economy.
Weak European Data
The European shared currency slid today after weaker-than- expected economic data as austerity measures by some euro-region countries to reduce budget deficits undermined their recovery.
The extra yield investors demand to hold Spanish 10-year bonds instead of similar-maturity German securities touched 200 basis points, a three-month high, leading the spread-widening among bonds of Europe’s peripheral nations.
“Those spreads have been widening for a couple weeks now, but now that we’re past quantitative easing the market has been more focused on that,” said Amelia Bourdeau, a currency strategist in Stamford, Connecticut, at UBS AG.
Retail sales in the euro region fell 0.2 percent in September from the previous month, when they also slipped 0.2 percent, the European Union’s statistics office said today. Spain’s gross domestic product stalled in the third quarter, the Bank of Spain estimated.
To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net; Catarina Saraiva in New York at asaraiva5@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
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