Dollar Rises to 2-Month High Versus Yen on Fed Bets

(Corrects Australian confidence figure in eighth paragraph, date of Japan GDP release in 19th in story originally published Nov. 12.)

The dollar strengthened to a two-month high against the yen as signs the world’s largest economy is gathering momentum boosted the appeal of the U.S. currency.

New Zealand’s dollar fell to a seven-week low as the central bank said it sees signs that restrictions introduced last month to prevent a housing bubble are starting to work. The greenback rose versus most of its 16 major peers as a gauge of national business activity improved after payroll gains last week topped forecasts. The yen declined before the government releases its quarterly economic-growth data on Nov. 14. Ten-year Treasury note yields rose to the highest since Sept. 18.

“We’re looking at this as a stabilization here and it looks like the dollar is pretty well supported,” Eric Viloria, a senior currency strategist at Gain Capital Group LLC in New York, said in a phone interview. “Dollar-yen has been breaking higher and it looks like the relationship between dollar-yen and U.S. Treasury yields has been strengthening.”

The dollar rose 0.5 percent to 99.64 yen at 5 p.m. in New York after advancing to 99.80 yen, the strongest level since Sept. 13. It last touched 100 yen on Sept. 11. The U.S. currency fell 0.2 percent to $1.3436 per euro. The yen weakened 0.7 percent to 133.87 per euro.

The Bloomberg U.S. Dollar Index, which monitors the greenback against 10 major counterparts, rose 0.1 percent to 1,022.05 after reaching 1,025.01, the highest since Sept. 13.

Benchmark 10-year yields climbed three basis points, or 0.03 percentage point, to 2.77 percent after reaching 2.79 percent. Similar maturity Japanese government bonds yielded 0.59 percent.

Kiwi, Aussie

New Zealand’s currency extended losses as the central bank said a fall in home-building approvals and a drop in attendance at open homes are evidence that the limits on low-deposit lending are “starting to affect the housing market.”

The so-called kiwi fell for a fourth day, dropping 0.4 percent to 82.21 U.S. cents after declining as much as 1 percent. It touched 81.69, the weakest level since Sept. 17.

Australia’s dollar fell for a fourth day as a sentiment gauge among businesses dropped to 5 in October from 12 the prior month, National Australia Bank Ltd. said. A measure of business conditions was unchanged at minus 4.

The Aussie dropped 0.6 percent to 93.02 U.S. cents after sliding to 92.69 cents, the lowest level since Sept. 16.

Pound, Krona

The pound fell for a third day versus the dollar and euro as the National Statistics Office said annual consumer-price inflation slowed to 2.2 percent last month from 2.7 percent in September, less than the 2.5 percent rate predicted in a Bloomberg survey. The Bank of England publishes new economic forecasts in its quarterly Inflation Report tomorrow.

Sterling dropped 0.5 percent to $1.5905 after falling to $1.5855, the lowest level since Sept. 13. Sterling slid 0.8 percent to 84.48 pence per euro.

Sweden’s krona weakened to a 17-month low versus the euro after a report showed the nation unexpectedly returned to deflation last month, boosting speculation the central bank will cut interest rates.

The krona slid 1.6 percent to 8.9387 per euro after declining to 8.9425, the weakest since June 2012.

‘Dollar Strength’

The U.S. dollar extended gains after the Chicago Federal Reserve national index rose to 0.14 in September from a revised 0.13 the month before, with 47 of the 85 monthly individual indicators making positive contributions.

The greenback rose 0.6 percent last week after a gain of 204,000 workers in October topped all forecasts in a Bloomberg survey.

“The dollar has been outperforming other currencies in the wake of last week’s number -- we’re still sort of riding the coattail of that into this week,’” Fabian Eliasson, head of U.S. currency sales in New York at Mizuho Financial Group Inc., said in a phone interview. “It’s a continuation of broad dollar strength.”

The Bloomberg U.S. Financial Conditions Index (BFCIUS), which combines everything from money-market rates to yields on government and corporate bonds to equity volatility, climbed 0.4 percent to 1.825, set for the highest closing level in data starting in January 1994.

The yen declined against most of its major counterparts today before the Cabinet Office reports Nov. 14 that Japan’s economic growth slowed to 0.4 percent in the third quarter from 0.9 percent in the previous three months, according to a Bloomberg News survey.

100 Yen

“There’s a strong chance that the dollar hits 100 yen in the next day or so,” said Adam Myers, European head of foreign-exchange strategy at Credit Agricole Corporate & Investment Bank in London. “The dollar will move higher versus the yen as the market will bring forward its estimate for U.S. tapering.”

The dollar will appreciate to 103 yen in six months and 105 within a year, Myers said, citing Credit Agricole’s forecasts. It hasn’t reached 105 since October 2008.

Policy makers will pare the monthly pace of bond buying to $70 billion at their March 18-19 meeting from the current pace of $85 billion, according to the median of 32 economist estimates in a Bloomberg News survey on Nov. 8. The median forecast in an Oct. 17-18 survey of 40 economists also called for a reduction to $70 billion in March.

The dollar has gained 4.3 percent this year, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The yen tumbled 11 percent, while the euro appreciated 6.5 percent.

To contact the reporter on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net

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

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