The dollar climbed to a five-week high against the euro before a government report that economists said will show the U.S. added the most jobs in four months, backing the case for reducing monetary stimulus.
The U.S. currency headed for its longest run of weekly gains in nine months versus the euro as investors weighed the timing for the Federal Reserve’s first interest-rate increase since 2006. The European Central Bank is ready to take additional steps to avoid deflation, President Mario Draghi said yesterday. The yen headed for a weekly decline versus the dollar. Turkey’s lira weakened as Prime Minister Recep Tayyip Erdogan said the central bank needs to cut borrowing costs.
“It’s going to be dollar positive” if the jobs data meets economists’ expectations, said Shant Movsesian, a currency strategist at 4Cast Ltd. in London. “There’s nothing really taking off in Europe that suggests a sustainable recovery, so on that basis euro-dollar was hit lower.”
The dollar rose 0.1 percent to $1.3710 per euro at 6:53 a.m. in New York after climbing to $1.3696, the strongest since Feb. 28. It has gained 0.3 percent since March 28, set for a third weekly advance, the longest since the period ended July 5. The U.S. currency was little changed at 103.91 yen. The euro weakened 0.1 percent to 142.46 yen.
U.S. employers added 200,000 workers last month, the most since November, according to a Bloomberg News survey before today’s Labor Department data. The jobless rate dropped to 6.6 percent from 6.7 percent in February, another survey showed.
“Payrolls will meet, if not exceed, the market’s expectations, providing a further boost to the dollar,” Kathy Lien, managing director at BK Asset Management in New York, wrote yesterday in a research note. Six of eight labor-market indicators, including an increase in the employment component of the Institute for Supply Management’s non-manufacturing index, “argue for stronger” payrolls data, she said.
The Fed may increase its benchmark interest rate from the current range of zero to 0.25 percent in “around six months” after it ends its currency-debasing bond-purchase program, Chair Janet Yellen said last month.
The dollar gained 0.6 percent in the past six months, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The euro gained 1.9 percent, while the yen slumped 6.3 percent.
ECB policy makers “do not exclude further monetary policy easing,” Draghi said yesterday in Frankfurt after policy makers kept their refinancing rate at a record-low 0.25 percent. “There was a discussion about QE, it wasn’t neglected,” he said, referring to quantitative easing.
Bank of Japan policy makers meet on April 7-8. All 36 economists surveyed by Bloomberg News predict officials will keep their policy of targeting an annual increase in the monetary base of 60 trillion yen to 70 trillion yen. Japan implemented on April 1 an increase in the consumption tax to 8 percent from 5 percent, the first since 1997.
“We believe the BOJ will have to implement additional monetary easing to limit the tax hike’s impact,” Osamu Takashima, a Citigroup Inc. foreign-exchange strategist in Tokyo, wrote yesterday in an e-mailed note to clients. “This should increase downward pressure on JPY.”
The lira dropped for a second day after Erdogan said the central bank should call an off-schedule monetary policy meeting to cut interest rates after local elections damped concern that political stability was in danger.
“Just like it increased rates in January, the central bank should convene for an extraordinary meeting and cut,” Erdogan said at a press conference in Istanbul.
The Turkish currency fell 0.2 percent to 2.1367 per dollar after weakening 0.2 percent yesterday.
To contact the reporter on this story: Lukanyo Mnyanda in Edinburgh at firstname.lastname@example.org