Dollar Gains to 6-Month High on December Taper Bet; Baht Drops

The dollar rose to a six-month high against the yen as an unexpected drop in U.S. jobless claims and a rise in leading economic indicators added to speculation the Federal Reserve may start reducing stimulus next month.

The euro strengthened to a four-year high against the yen as German lawmakers reached a coalition accord on wages and spending increases without raising taxes, spurring demand for the region’s assets. The Thai baht fell after the central bank cut interest rates, while the Canadian dollar dropped as crude oil slipped for a fourth day.

“The dollar is benefiting from a very small risk of taper in December,” Omer Esiner, chief market analyst in Washington at the currency brokerage Commonwealth Foreign Exchange Inc., said in a phone interview. “I’m still a little skeptical about December tapering. Granted the FOMC meeting minutes was a bit more hawkish than expected, but if you just focus on what Bernanke and Yellen said, the most likely scenario is taper in the first quarter.”

The dollar gained 0.9 percent to 102.16 yen at 5 p.m. in New York and touched 102.19, the strongest level since May 29. It slipped 0.1 percent to $1.3579 against the common currency, having dropped as much as 0.3 percent earlier. The euro advanced 0.9 percent to 138.73 yen after touching 138.79, the highest since June 2009.

The Bloomberg U.S. Dollar Index, which tracks the currency against 10 major counterparts, rose 0.3 percent to 1,021.55.

Baht, Loonie

The baht fell versus the dollar after the Bank of Thailand cut its one-day bond repurchase rate by a quarter of a percentage point to 2.25 percent amid political unrest that is hurting the nation’s economy. All 19 economists in a Bloomberg News survey predicted the rate would remain unchanged.

Protesters besieged government ministries this week, demanding that Prime Minister Yingluck Shinawatra step down. Political rallies against an amnesty for political offenses stretching back to a 2006 coup that ousted the prime minister’s brother, Thaksin Shinawatra, morphed into a wider movement. Protest leader Suthep Thaugsuban has called for a nationwide program of civil disobedience to bring down the administration.

The baht slid 0.1 percent to 32.11 per dollar after weakening 1.6 percent in the previous six days.

The Canadian dollar weakened to the least since July as crude oil touched the lowest level in almost six months. The loonie dropped 0.5 percent to C$1.0595 after touching C$1.0603 per U.S. dollar, the weakest since July 5. The Australian dollar depreciated 0.5 percent to 90.79 U.S. cents and New Zealand’s kiwi slid 0.6 percent to 81.48 U.S. cents.

Pound Gains

The pound gained versus all its 16 major counterparts as the Office for National Statistics said gross domestic product increased 0.8 percent in the three months through September, matching an initial estimate.

“The report showed the strengthening of the U.K. economy is being driven by domestic factors,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “It’s consistent with the picture that we already knew, that the U.K. economy is strengthening. The break to the upside for pound versus the dollar was a reflection of it moving above the recent highs and that’s encouraged a squeeze higher.”

The U.K. currency advanced 0.4 percent to $1.6287 after climbing to $1.6331, the highest level since Jan. 2.

German Coalition

Merkel clinched the coalition agreement with the Social Democratic Party that calls for a national minimum wage and pledges to increase spending on pensions and infrastructure.

The accord reached shortly before 5 a.m. in Berlin after 17 hours of negotiations sets Merkel on track for a third term leading the nation until 2017. The agreement must still be passed by the entire SPD, which plans a referendum among its about 470,000 members.

“Euro-yen seems to be the driver of euro-dollar,” said Ned Rumpeltin, head of Group of 10 currency strategy at Standard Chartered Bank in London. “It’s rock solid. I don’t think anyone in the market really doubted that Germany would find a stable coalition, but it just adds to the overall sense of continuity in Europe.”

The euro has added 0.5 percent in the past month, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The yen has fallen 2.8 percent in the same period, while the greenback has risen 2.2 percent.

Tapering, Tightening

The dollar rose for the fourth time in five days against the yen as jobless claims in the week ended Nov. 23 declined 10,000 to 316,000, the Labor Department said today in Washington. The median forecast of 44 economists surveyed by Bloomberg called for an increase to 330,000.

The index of U.S. leading indicators rose for a fourth straight month in October, reflecting gains in factory orders and applications to begin new-home construction. The Conference Board’s gauge of the economic outlook for the next three to six months increased 0.2 percent last month after a 0.9 percent jump in September that was more the previously reported, the New York-based group said today. The median forecast of economists surveyed by Bloomberg called for no change.

“People are still on edge about tapering, but the market has differentiated between tapering and tightening,” said Simon Smith, chief economist at FxPro Group Ltd. in London.

Minutes of the Fed’s Oct. 29-30 meeting showed policy makers “generally expected” improvement in employment data that would “warrant trimming the pace of purchases in coming months.” Chairman Ben S. Bernanke said last week the central bank will probably hold down its target interest rate long after ending $85 billion in monthly bond purchases.

The Fed will pare its buying to $70 billion, from the current pace of $85 billion, at its March 18-19 meeting, according to the median of 32 economist estimates in a Bloomberg survey this month. The next gathering is Dec. 17-18.

To contact the reporter on this story: Andrea Wong in New York at awong268@bloomberg.net

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

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.