The yen rallied for a second day against the dollar as stronger-than-forecast U.S. economic data spurred speculation the Federal Reserve will reduce stimulus that has driven up stocks globally.
Japan’s currency strengthened from an almost six-month low reached yesterday as the U.S. jobs data from ADP Research Institute increased signs the economic recovery is gaining momentum before the government’s monthly payroll report Dec. 6. Australia’s dollar slumped to a three-month low after the economy expanded less in the third quarter than forecast. Canada’s dollar fell as its central bank bolstered interest-rate-cut speculation. Futures on the Nikkei stock index fell 0.9 percent.
“The issue that the yen faces at the moment, you get strong data, and the market thinks in terms of Fed tapering,” Alan Ruskin, the New York-based global head of Group of 10 foreign-exchange strategy at Deutsche Bank AG, the world’s biggest currency trader, said in a phone interview. “With Japanese equities, it’s a little bit chicken-egg, but there’s no question it’s the dominant relationship. It’s kind of tick-for-tick with equities.”
The yen rallied 0.2 percent to 102.36 versus the dollar as of 5 p.m. in New York, after touching 103.38 yesterday, the weakest level since May 23. The U.S. currency was little changed at $1.3593 per euro. The yen gained 0.1 percent to 139.13 per euro.
The Bloomberg U.S. Dollar Index, which tracks the U.S. currency against 10 major counterparts, was little changed at 1,020.94, after rising to 1,025.36 yesterday, the highest level since Sept. 13.
A measure of volatility among major currencies increased for a third day. JPMorgan Chase & Co.’s Group of Seven Volatility Index climbed to 8.59 percent, the highest since Oct. 10. The gauge is up from this year’s low of 7.48 on Oct. 28.
The rand declined for a third day amid the longest selloff of South African bonds in five years on concern the nation will struggle to finance its current-account gap when Fed stimulus dries up. The currency weakened 1 percent to 10.4364 per dollar, touching the lowest level since Aug. 28.
Bank of Canada policy makers kept the benchmark rate on overnight loans between commercial banks at 1 percent, where it’s been for more than three years, as forecast by all 22 economists in a Bloomberg News survey.
The Canadian dollar fell 0.3 percent to C$1.0684 versus the greenback, reaching the lowest level since May 2010.
Indonesia’s rupiah fell 1 percent to 11,888 per dollar after touching 12,018, almost the weakest level since 2009. Yields on Treasury 10-year notes touched 2.85 percent, the highest since Sept. 18.
“Emerging markets are weakening, as I would expect, and the 10-year yield is backing up a bit, also as expected,” said Brad Bechtel, the managing director at Faros Trading LLC in Stamford, Connecticut. The moves “reflect the underlying strength of the ADP report, which had a strong print this month and a very strong revision.”
Australia’s dollar slumped the most since July against the U.S. currency as the slowdown in growth damped demand for the South Pacific nation’s assets.
Gross domestic product expanded 0.6 percent in the third quarter from the previous three months when it rose a revised 0.7 percent, the statistics bureau said. The median forecast in a Bloomberg News survey was for 0.7 percent growth.
“It’s a disappointing GDP number and we’re currently running significantly below trend, so clearly the Australian economy requires further stimulus,” said Robert Rennie, global head of foreign-exchange and commodity strategy at Westpac Banking Corp. in Sydney. “The Aussie has weakened, but we’re beginning to show signs of basing in the low 90s.”
The Australian dollar fell 1.2 percent to 90.29 U.S. cents after sliding below 90 to the weakest level since Sept. 3.
Companies in the U.S. boosted payrolls by 215,000 in November, according to figures from the ADP in Roseland, New Jersey. The median forecast of 40 economists surveyed by Bloomberg called for a 170,000 advance.
“You can see by the reaction in foreign exchange that the ADP was considered to be the most important number, and it’s raised prospects for a solid payrolls on Friday,” Richard Franulovich, the chief currency strategist for the northern hemisphere at Westpac Banking Corp. in New York, in a phone interview. Next year “is the year of the dollar, potentially. The Fed is inching toward less easing via less asset purchases.”
The Institute for Supply Management’s nonmanufacturing index decreased to 53.9 in November from 55.4 in the prior month, a report from the Tempe, Arizona-based group showed. The median estimate in a Bloomberg survey of 67 economists was 55.
“My caution is that ADP doesn’t have a good track record,” Westpac Banking’s Franulovich said of ADP figures’ correlation to Labor Department data.
American employers hired 185,000 workers last month after adding 204,000 in the previous month, economists said before the Labor Department releases the figure.
The Fed said in its latest Beige Book business survey today that gains in manufacturing, technology and housing kept the U.S. economy expanding at a “modest to moderate” pace from early October through mid-November.
Central bank officials, who next meet on Dec. 17-18, said they may reduce the central bank’s $85 billion in monthly bond purchases “in coming months” as the economy improves, according to minutes of their October meeting released last month.
The dollar has gained 3.9 percent this year, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The euro appreciated 7.4 percent, while the yen slumped 13.6 percent.
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