The euro rose from the lowest level in a month as European Central Bank President Mario Draghi strengthened his pledge to keep interest rates low for an extended period to protect economic gains.
The greenback touched a four-month high against a basket of peers as initial-jobless claims dropped before the U.S. releases its nonfarm-payrolls report tomorrow. Emerging-market currencies plunged on speculation that forecast U.S. jobs gains will be enough to allow the Federal Reserve to keep cutting bond purchases that have added liquidity to global markets. Canada’s dollar fell to a four-year low.
“We got a much more forceful defense of the forward guidance and low rates,” Richard Franulovich, the chief currency strategist for the northern hemisphere at Westpac Banking Corp. in New York, said of Draghi’s comments in a phone interview. “I think people would prefer to be flat the euro ahead of payrolls tomorrow.”
The euro gained 0.2 percent to $1.3608 at 5 p.m. in New York after declining to $1.3549, the lowest level since Dec. 5. It failed to fall below the 100-day moving average of $1.3546, a measure of momentum. The common currency added 0.2 percent to 142.65 yen. The dollar closed little changed at 104.82 yen.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 of its major counterparts, dropped 0.1 percent to 1,028.21 after climbing to 1,030.42, the highest level since Sept. 9.
An equally weighted basket of the so-called BRICS emerging-market currencies, consisting of Brazil, Russia, India, China and South Africa, fell against the dollar to 94.76, the lowest since Sept. 10. The carry-trade gauge has declined from a high last year of 101.5 in May.
“Our broad theme in foreign-exchange has been one of EM weakness relative to G-10, rather than one of ubiquitous dollar strength,” Citigroup Inc. analysts led Jeremy Hale, head of macro strategy in London, said today in a report.
A carry trade is a strategy in which an investor borrows in a currency with low interest rates to fund purchases of higher-yielding assets.
The rand dropped 0.2 percent to 10.7962 per U.S. dollar and touched 10.8353, lowest since October 2008.
The Canadian dollar reached the weakest level since 2009 amid speculation slowing employment growth will push the Bank of Canada closer to considering lowering interest rates. Employers added 14,100 jobs in December, compared with 21,600 the previous month, according to a Bloomberg survey before tomorrow’s report.
Canada’s economy “also had some really weak housing, Ivey and trade data this week, and dollar-Canada broke through a very big level,” Westpac’s Franulovich said. “Everybody is all over CAD at the moment -- that’s kind of the trade du jour.”
The loonie depreciated 0.2 percent to C$1.0842 per U.S. dollar and touched C$1.0875, the weakest level since October 2009.
U.S. jobless claims fell by 15,000 to 330,000 in the week ended Jan. 4, the Labor Department said today. The median forecast of economists surveyed by Bloomberg was for a reading of 335,000. Employers hired 196,000 workers last month after adding 203,000 in November, according to a Bloomberg survey before the Labor Department report tomorrow.
The shared European currency initially fell versus the dollar as Draghi said the central bank “used firmer words for indicating the strength of our forward guidance.” The Governing Council today left its main refinancing rate at a record-low 0.25 percent, a decision predicted by all 51 economists in a Bloomberg survey.
Draghi touted economic gains while saying it’s too soon to say the euro region is out of danger.
“It’s a recovery that’s gone from being based exclusively on export growth” to one that is “very gradually extending into domestic demand,” Draghi said. “But it’s still premature to declare any victory.”
“The ECB has certainly been signaling that they’re willing and able to act if necessary to combat tighter monetary conditions and a deterioration in the outlook for inflation,” Brian Daingerfield, a Stamford, Connecticut-based currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit, said in a phone interview. “Adding stronger language to his prepared remarks and also defending that in his Q&A session, both of those weighed on the euro.”
The euro has gained 7.9 percent in the past 12 months, the best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted indexes. The dollar gained 5 percent, while the yen slumped 13 percent.
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