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Dollar Climbs as Data Support Economic Outlook

(Corrects to remove reference to BOJ possibly easing monetary policy tomorrow in second paragraph.)

The dollar gained against the yen and euro as U.S. initial jobless claims declined to the fewest in three weeks and a measure of manufacturing activity rose more than forecast, adding to evidence the economy is recovering.

The pound climbed to the highest level in two weeks versus the dollar as a report showed U.K. house prices rebounded in October and Britain’s biggest business lobby raised its economic forecasts for this year and next. The Japanese currency earlier weakened for a third day against the euro before the Bank of Japan (8301) releases tomorrow the minutes of the central bank’s Oct. 4-5 meeting.

“Better data means the Federal Reserve isn’t going to buy forever,” Michael Gapen, senior U.S. economist at Barclays Plc in New York, said of the central bank’s asset-purchasing efforts in an interview on Bloomberg Television’s “Lunch Money” with Sara Eisen. “That is how the dollar can outperform lower- yielding currencies like the yen.”

The dollar gained 0.4 percent to 80.12 yen per dollar at 5 p.m. in New York. It gained 0.1 percent to $1.2943 per euro. The yen declined 0.3 percent to 103.71 per euro.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, climbed 0.1 percent to 80.022.

Peso, Kiwi

The Mexican peso gained against all of its 16 most-traded peers on the U.S. employment report, which boosted the outlook for Latin America’s second-biggest economy.

The currency appreciated 0.7 percent, the first increase in four days, to 13.0067 per dollar. It earlier touched 13.1289 per dollar, the weakest intraday level since Sept. 6.

New Zealand’s dollar appreciated versus all its major counterparts except the peso after China’s manufacturing expanded for the first time in three months as output and new orders climbed, adding to signs growth in the economy is rebounding. China is New Zealand’s second-biggest trade partner.

The so-called kiwi increased 0.6 percent to 82.70 U.S. cents after climbing to 82.80, its highest level since Oct. 2. The currency rose 1 percent to 66.26 yen.

The Swedish krona slumped after a survey indicated that a contraction in the nation’s manufacturing worsened last month as exporters struggle to stay competitive against the fallout of Europe’s debt crisis.

The currency fell 0.2 percent to 6.6498 per dollar. It decreased 0.1 percent to 8.6079 against the euro.

‘Growing Jobs’

Applications for jobless benefits fell 9,000 to 363,000 in the week ended Oct. 27, the fewest in three weeks, the Labor Department reported today in Washington. Economists forecast 370,000 claims, according to the median estimate in a Bloomberg survey.

A separate report showed companies expanded payrolls in October by the most in eight months. The 158,000 increase following a revised 114,000 gain in September, data from the Roseland, New Jersey-based ADP Research Institute showed.

“What we have today is confirmation that we’re at least growing jobs at trend or a notch above,” Dan Dorrow, head of research in Stamford, Connecticut, at Faros Trading LLC, said in a telephone interview. “Given that, today’s currency moves are consistent with putting a floor under the risk selloff we’ve seen in the last week or so.”

The Institute for Supply Management’s U.S. factory index rose to 51.7 in October from 51.5 a month earlier, the Tempe, Arizona-based group said. Economists in a Bloomberg survey projected a reading of 51, according to the median of 88 forecasts. The dividing line between expansion and contraction is 50.

‘Firmer Dollar’

“The bias is toward a slightly firmer dollar,” said Steven Barrow, head of group-of-10 research at Standard Bank Plc in London. “Growth concerns are first and foremost, more so in the euro zone, and that’s not withstanding we’re trying to work out how much the storm will cost GDP data in the U.S.”

Hurricane Sandy, which battered the East Coast for three days ending yesterday, caused as much as $50 billion in economic damage, with about $10 billion to $20 billion of insured losses, more than double previous estimates, said Eqecat Inc., a provider of catastrophic risk models.

The Fed announced Sept. 13 a third round of its quantitative-easing program, this time making open-ended purchases of $40 billion of mortgage debt a month, as it seeks to boost economic growth and reduce unemployment. It earlier spent $2.3 trillion in two rounds of bond purchases and, in June, expanded by $267 billion a program to replace short-term bonds with longer-term debt.

Policy makers said they will keep pumping money into the economy until there was “ongoing, sustained improvement” in the labor market.

Sterling Gains

The BOJ increased its asset-purchase program on Oct. 30 by 11 trillion yen ($137 billion) to 66 trillion yen to bolster growth through lower borrowing costs. In the previous meeting earlier that month, the central bank avoided adding to stimulus.

Britain’s currency strengthened against the euro as the cost of a home increased 0.6 percent from September, when it fell 0.4 percent, the Nationwide Building Society said in an e- mailed statement today.

The economy will stagnate this year and expand 1.4 percent in 2013, the Confederation of British Industry said in a report published in London today. In August, it predicted a 0.3 percent contraction and a 1.3 percent expansion respectively.

Sterling was little changed at $1.6130 after touching $1.6175, the highest since Oct. 17. It gained 0.1 percent to 80.24 pence per euro.

The pound has risen 2.3 percent in the past year, the third-most out of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro posted the biggest drop in the period, falling 5.6 percent, and the yen lost 1.6 percent. The dollar gained 1 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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