Dollar Approaches Five-Year High Versus Yen Before Payroll Data

The dollar climbed toward the strongest level in five years against the yen before a U.S. report that economists said will show employers hired additional workers last month.

The Bloomberg Dollar Spot Index headed for a fourth weekly gain, the longest since March, amid bets an improving labor market will enable the Federal Reserve to keep reducing stimulus. The yen fell against the greenback after Goldman Sachs Group Inc. said Japan’s currency will weaken faster than it earlier predicted. The pound declined after U.K. factory output stalled in November. Sweden’s krona advanced after industrial production increased more than economists forecast.

“A figure of 200,000 or above definitely points to more tapering,” said Eimear Daly, head of market analysis at Monex Europe Ltd. in London, referring to today’s payroll report. “That would be very positive for the dollar. It’s a really tight one to call.”

The dollar gained 0.2 percent to 105.02 yen at 7:01 a.m. in New York after rising to 105.44 on Jan. 2, the strongest since October 2008. The U.S. currency advanced 0.1 percent to $1.3597 per euro. The yen dropped 0.1 percent to 142.80 per euro.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major counterparts, rose 0.1 percent to 1,029.11, having gained 0.3 percent this week. The gauge climbed to 1,030.42 yesterday, the highest level since Sept. 9.

Employers Hiring

U.S. employers hired 197,000 workers last month after adding 203,000 in November, according to a Bloomberg survey before the Labor Department report. The jobless rate held at 7 percent, the least since November 2008, economists predict. The Labor Department said yesterday first-time jobless claims fell by 15,000 to 330,000 last week, the lowest level since November.

Fed policy makers said in December they will cut monthly bond purchases to $75 billion from $85 billion starting in January. They will trim stimulus in $10 billion increments over the next seven meetings before ending them in December, according to a Bloomberg survey on Dec. 19.

“The general theme driving markets post taper is that upbeat U.S. data remains supportive of the U.S. dollar,” Mark McCormick, a macro strategist at Credit Agricole Corporate & Investment Bank in New York, wrote today in a research note.

The dollar has risen 1.4 percent in the past month, the second-best performer behind the krona of 10 developed-nation currencies tracked Bloomberg Correlation-Weighted Indexes. The euro strengthened 0.1 percent, while the yen fell 0.9 percent.

Weaker Yen

Goldman Sachs now predicts the yen will slide to 110 per dollar in 12 months, versus an earlier estimate of 107. Rate differentials are likely to increase as other central banks start to raise interest rates before the Bank of Japan, it said in a report yesterday.

The BOJ maintained a pledge to expand the nation’s monetary base by an annual 60 trillion yen to 70 trillion yen at a meeting last month. Policy makers doubled monthly bond purchases in April to more than 7 trillion yen to end deflation.

The pound fell the most in week against the dollar after industrial and manufacturing production unexpectedly stagnated and construction output dropped.

“The market is long of sterling and has pushed it lower on the back this data,” said Gavin Friend, a foreign-exchange strategist at National Australia Bank in London. A long position is a bet an asset price will rise. “There’s enough momentum in the U.K. economy and a danger of over-interpreting what this number means.”

The U.K. currency dropped 0.4 percent to $1.6418, the biggest decline since Jan. 2. It depreciated 0.3 percent to 82.82 pence per euro.

Krona Rises

The krona strengthened for a second day against the euro and the dollar as the Swedish Statistics Institute said industrial production jumped 5.7 percent in November. Economists surveyed by Bloomberg predicted an increase of 1 percent.

Sweden’s currency advanced 0.6 percent to 8.872 per euro and appreciated 0.5 percent to 6.5245 per dollar.

A measure of currency volatility declined to the lowest level in seven weeks.

JPMorgan Chase & Co.’s volatility index for the currencies of the Group of Seven nations fell to 7.85 percentage points, the lowest since Nov. 20, from 7.90 percent yesterday. The gauge has dropped from last year’s high of 11.96 percent set in June.

To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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