Dollar Heads for Weekly Gain Before U.S. Payrolls; Aussie Slides

The dollar headed for weekly gains versus all 16 of its major counterparts before a U.S. report that analysts said will show the jobless rate declined last month, adding to signs the economy is gaining momentum.

The Bloomberg U.S. Dollar Index was poised for its first weekly advance in a month on speculation the data bolsters the case for the Federal Reserve to start reducing bond purchases that tend to weaken a currency. Australia’s dollar slid to the weakest in almost three years versus the U.S. currency on bets policy makers will cut interest rates to a record low. The pound strengthened after a gauge of U.K. construction increased.

“We’ve seen the dollar coming back to life before the employment report,” said John Hardy, head of foreign-exchange strategy at Saxo Bank A/S in London. “We need to see decent numbers because we are now dependent on incoming data. It’s important for the unemployment rate to drop back to the cycle low from April. It’s time for the dollar to prove itself.”

The dollar was little changed at $1.3204 per euro at 7:10 a.m. New York time, having appreciated 0.6 percent against the common currency this week. The greenback rose 0.2 percent to 99.78 yen, extending its gain since July 26 to 1.6 percent. The Japanese currency slid 0.2 percent to 131.78 per euro.

U.S. employers added 185,000 jobs in July, following a 195,000 gain in June, according to the median forecast of economists in a Bloomberg News survey before the Labor Department’s figures today. The jobless rate is projected to have declined to 7.5 percent from 7.6 percent.

U.S. Data

Data yesterday showed manufacturing expanded faster than analysts estimated and initial jobless-benefit claims fell to a five-year low.

“The risk for the U.S. jobs number is to the upside,” said Derek Halpenny, European head of global-markets research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The barrier is a little bit higher for the dollar to gain. It might take a payroll reading north of 250,000 to see the dollar appreciate notably. We are certainly now more confident in our view that the US economy is strengthening.”

The dollar rose 5.8 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The yen has fallen 9.5 percent, the worst performance after the Aussie’s 11 percent drop, and the euro gained 5.9 percent.

Fed Purchases

The Federal Open Market Committee kept its monthly purchases of Treasuries and mortgage securities unchanged at $85 billion this week, while warning that persistently low inflation could hamper the recovery. It repeated a pledge to continue stimulus until the U.S. labor market outlook has improved substantially.

Half of the 54 economists surveyed by Bloomberg last month said the Fed may curb its monthly purchases to a total of $65 billion at its Sept. 17-18 meeting.

The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major currencies, was little changed at 1,035.34, bound for a 1.2 percent advance this week.

The Australian dollar dropped for a fifth day before central bank officials gather for a monetary policy decision next week, when they are expected to lower borrowing costs.

The Reserve Bank will cut its overnight cash rate target by a quarter percentage point to 2.5 percent, according to all but one of 27 economists surveyed by Bloomberg News. Traders agree, seeing a 94 percent chance of a reduction, according to interest-rate swaps data compiled by Bloomberg.

The Aussie fell 0.3 percent to 89.03 U.S. cents after sliding to 88.79, a level unseen since August 2010. It is headed for a 3.8 percent decline this week, the steepest drop since September 2011.

The pound rose versus all 16 of its major peers after Markit and the Chartered Institute of Purchasing and Supply said an index of construction output reached 57 last month compared with 51 in June. Economists forecast 51.5. A reading above 50 indicates expansion.

Sterling gained 0.2 percent to $1.5149 and added 0.2 percent to 87.16 pence per euro.

To contact the reporters on this story: Neal Armstrong in London at narmstrong8@bloomberg.net; Mariko Ishikawa in 東京 at mishikawa9@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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