The dollar held above 100 yen for a second day, after rallying from the lowest in almost a month, before U.S. employment data that may add to the case for the Federal Reserve to slow stimulus.
Kansas City Fed President Esther George yesterday urged a reduction in the central bank’s bond-buying program, known as quantitative easing, as growth quickens. San Francisco Fed President John Williams said a “modest adjustment downward” in purchases is possible “as early as this summer.” Australia’s dollar fell after the nation’s economy grew at the slowest pace in almost two years.
“The dollar weakness only lasted for a day,” said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “The market will be swayed by comments by Fed speakers about when they may end the QE program ahead of U.S. jobs data.”
The dollar gained 0.2 percent to 100.18 yen at 11:04 a.m. in Tokyo from yesterday, when it advanced 0.5 percent. It slid to 98.87 on June 3, the lowest since May 9. The euro fell 0.1 percent to $1.3072. The shared currency was little changed at 130.95 yen from 130.84.
The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against currencies of six U.S. trading partners, rose 0.1 percent to 82.86.
The ADP Research Institute will probably say today the pace of hiring in the U.S. quickened by 46,000 jobs to 165,000 in May from the previous month, according to the median estimate of economists surveyed by Bloomberg News.
The Labor Department reported last month that nonfarm payrolls swelled by 165,000 jobs in April, more than forecast, and the unemployment rate unexpectedly fell to 7.5 percent. It will probably say June 7 that employers added 167,000 workers in May, economists forecast.
Figures from the Commerce Department yesterday showed the U.S. trade deficit widened in April from a more than three-year low, reflecting a rebound in imports of consumer goods and business equipment.
The Fed is buying $85 billion of Treasury and mortgage bonds each month to put downward pressure on borrowing costs under its quantitative-easing stimulus strategy, which tends to debase the dollar.
“In light of improving economic conditions, I support slowing the pace of asset purchases as an appropriate next step for monetary policy,” Kansas City Fed President George said in the text of her speech. “Waiting too long to acknowledge the economy’s progress and prepare markets for more-normal policy settings carries no less risk than tightening too soon,” she said.
Dallas Fed President Richard Fisher told reporters in Toronto the Fed should begin to “dial back” rate of bond buying.
The dollar has gained 4.5 percent this year, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro has climbed 3.5 percent, while the yen has declined 11 percent, the biggest loser.
The yen weakened against most of its major peers before Japanese Prime Minister Shinzo Abe outlines his growth strategy, the “third arrow” of an economic revival plan that seeks to build on fiscal and monetary stimulus. The currency fell to the weakest since October 2008 last month, after the Bank of Japan announced in April it will buy more than 7 trillion yen ($70 billion) of bonds every month.
“Should we see more details of Abe’s growth strategy come out, that may spur buying of domestic stocks and put the yen under selling pressure,” said Junya Tanase, the chief currency strategist at JPMorgan Chase & Co. in Tokyo.
The Topix share index was little changed from yesterday, when it jumped 2.6 percent.
“The speculative community is still very, very long dollar-yen, so any signs of disappointment may trigger a knee-jerk move lower on dollar-yen,” Thomas Harr, the head of Asia local markets strategy at Standard Chartered Plc in Singapore, said in a Bloomberg Television interview. “We still think over the coming months, there will be a further leg up in dollar-yen, but he has to deliver today and calm market to put upward pressure again on dollar-yen.” A long is a bet prices will rise.
Demand for the euro was limited before data forecast to confirm a sixth straight quarter of contraction in the region’s economy. Preliminary figures will probably show that gross domestic product in the 17-nation euro zone shrank 0.2 percent in the three-months ended March 31, after a 0.6 percent decline in the fourth quarter, economists predicted before the release today.
In Australia, GDP (AUNAGDPC) grew at a 2.5 percent annualized rate in the first quarter, the slowest pace since the three months ended June 30, 2011, a statistics bureau report released in Sydney showed. The result was less than the 2.7 percent increase expected by economists in a Bloomberg survey and revised 3.2 percent growth in the fourth quarter.
Demand for New Zealand’s kiwi dollar was limited after milk prices fell to a three-month low. Whole milk powder auction prices tumbled amid expectations of rising production in the second half of the year.
Powder for August delivery slumped 15 percent, according to a trade-weighted index on the Auckland-based Fonterra Cooperative Group Ltd.’s GlobalDairyTrade website. The near-term contract for New Zealand product fell to $5,250 a metric ton, the lowest since March 5.
The Aussie dropped 0.3 percent to 96.17 U.S. cents from yesterday, when it sank 1.2 percent. New Zealand’s dollar was little changed at 80.24 U.S. cents from yesterday, when it weakened 0.9 percent.
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