Dollar Rises as Haven Demand Overshadows Services, Hiring

The dollar gained versus most of its major peers as investors seeking a haven from signs of slower global growth ignored U.S. reports showing the service industries and private employment expanded more than forecast.

Australia’s currency slid to the weakest in almost a month after the nation had its biggest trade deficit since 2008 and data showed China’s services industry expanded the least in more than a year. The euro declined versus the greenback after a report showed the region’s services and manufacturing shrank. The U.S. jobless rate rose, a report may show Oct. 5.

“The overall backdrop is still that of weak data around the world,” Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York, said in a telephone interview. “There’s also probably some caution around more subdued market trends ahead of key events later this week.”

The dollar strengthened 0.4 percent to 78.49 yen at 5 p.m. New York time and touched 78.59 yen, the highest level since Sept. 19. Japan’s currency depreciated past its 50-day moving average against the U.S. currency, 78.42 yen, for the first time in two weeks.

The greenback rose 0.1 percent to $1.2905 per euro, and the 17-nation currency advanced 0.3 percent to 101.30 yen.

Implied volatility, which signals the expected pace of currency swings, was at almost a five-year low. It was 7.81 percent, after touching 7.73 percent on Sept. 28, the least since October 2007, a JPMorgan Chase & Co. index for the currencies of Group-of-Seven nations showed. Lower volatility makes investments in currencies with higher benchmark lending rates more attractive because the risk in such trades is that market moves will erase profit.

Dollar Index

The Dollar Index (DXY), which tracks the U.S. currency against those of six major trading partners, rose 0.3 percent to 79.951, snapping a two-day decline.

“The dollar is being bid up to some degree on the back of uncertainties that maybe perhaps be emanating from the euro zone,” Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto, said in a phone interview.

The U.S. currency remained higher after the Institute for Supply Management’s index of U.S. non-manufacturing businesses, which covers about 90 percent of the economy, rose. The gauge increased to 55.1 in September from the prior month’s 53.7, the Tempe, Arizona-based group said today. The median forecast in a Bloomberg News survey was for a decline to 53.4.

Employment Reports

Private employers in the U.S. increased payrolls by 162,000 workers in September following a revised 189,000 jump in August, figures from Roseland, New Jersey-based ADP Employer Services showed. The median forecast of 38 economists surveyed by Bloomberg projected a 140,000 advance.

A Labor Department report on Oct. 5 will show the nation’s unemployment rate rose to 8.2 percent in September, from 8.1 percent the prior month, economists in a Bloomberg survey forecast. The jobless rate has been stuck above 8 percent since February 2009. U.S. nonfarm payrolls increased by 115,000 jobs last month, economists forecast, compared with a monthly average of 226,000 in the first quarter.

The Polish zloty rose against most of its 31 major counterparts tracked by Bloomberg as Poland’s central bank unexpectedly left interest rates unchanged for a fourth meeting.

The currency jumped 0.6 percent to 3.1659 per U.S. dollar and climbed 0.7 percent to 4.0854 per euro.

Krona, Kiwi

Sweden’s krona and New Zealand’s dollar, nicknamed the kiwi, were the biggest losers among the greenback’s most-traded counterparts.

The krona dropped amid rising speculation Riksbank policy makers will cut interest rates again at the end of the month. A survey showed Sweden’s services economy contracted in September, sinking at the fastest pace since August 2009.

The krona slid 1.2 percent to 6.6856 per dollar. It weakened 1.1 percent to 8.6286 per euro.

New Zealand’s dollar fell 1 percent to 81.94 U.S. cents after data showed China’s non-manufacturing industries grew at the weakest pace since at least March 2011. China is the country’s second-largest export market, and Australia’s biggest trade partner.

Australia’s dollar also sank after data showed the nation’s trade gap for August was almost three times wider than the median forecast of economists. Imports exceeded exports by A$2.03 billion ($2.07 billion) in August, versus a revised A$1.53 billion gap in July. The currency dropped yesterday after the Reserve Bank of Australia unexpectedly cut its benchmark interest rate a quarter-percentage point to 3.25 percent.

Another Cut

“We’re probably looking at another rate cut before the end of the year, probably at next month’s meeting,” Wells Fargo’s Serebriakov said. “After that, we would have a tendency to see steady rates through 2013.”

The Aussie dollar dropped as much as 0.7 percent to $1.0196, the weakest since Sept. 6, before trading at $1.0216.

A composite index based on a survey of euro-area services and manufacturing purchasing managers fell to 46.1 from 46.3 in August, London-based Markit Economics said today. A reading below 50 indicates contraction.

The European Central Bank meets tomorrow in Ljubljana, Slovenia. It will keep the benchmark interest rate unchanged at a record-low 0.75 percent, a Bloomberg survey forecast.

The euro remained higher against most major peers even after Spanish Prime Minister Mariano Rajoy yesterday denied immediate plans to ask for a bailout in response to mounting speculation that a request was imminent.

Spanish Banks

Spain has received approval for as much as 100 billion euros ($129 billion) in aid for its failing banks.

European officials are debating the role of their planned permanent rescue fund in recapitalizing banks, the European Commission said last week. Finance ministers from Germany, Finland and the Netherlands reiterated that such bailouts will only be possible after there’s a common supervisor, and national authorities should have responsibility for “legacy assets.”

“If we get no movement in terms of clarifying issues like the legacy assets and the way in which they will be dealt, further into October we could see confidence slip again,” Derek Halpenny, the European head of global-markets research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, said in a television interview on “Bloomberg Surveillance” with Tom Keene.

The shared currency strengthened 1.8 percent in the past month, according to Bloomberg Correlation Weighted Indexes. The dollar declined 1.2 percent and the yen slid 1.3 percent.

To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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