Dollar Gauge Falls to Lowest in 5 Months; Aussie, Kiwi Advance

The dollar dropped to the lowest level in more than five months against a basket of peers as the threat of more stimulus from the European Central Bank dissipated and U.K. industrial output exceeded forecasts.

The U.S. currency fell for a second day against the euro after a U.S. job report last week showed employers added fewer workers than economists forecast, damping speculation the recovery is gaining momentum. Australia’s dollar strengthened along with the currencies of New Zealand and South Africa. The yen rose as the Bank of Japan refrained from adding extra stimulus at a policy meeting. A Bloomberg index of emerging-market currencies reached an almost four-month high.

There’s “a broadly weaker U.S. dollar bias, but not necessarily tied to one specific event or condition,” said Robert Lynch, a currency strategist at HSBC Holdings Plc in New York. “The euro-bearish effects of Draghi’s threat of non-conventional measures has worn off.”

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 of its major counterparts, declined 0.6 percent to 1,008.53 at 5 p.m. in New York after falling to 1,007.92, the lowest level since Oct. 31.

The dollar dropped 0.4 percent to $1.3797 per euro after sliding 0.3 percent yesterday. The greenback depreciated 1.3 percent to 101.81 yen and touched 101.55, the weakest since March 19. Japan’s currency rose 0.9 percent to 140.47 per euro.

Currency Volatility

The JPMorgan Group of Seven Volatility Index declined to as low as 6.75 percent, the lowest level since August 2007, before closing at 6.8 percent.

A custom Bloomberg index with equal weightings of the dollar’s 20 most-traded emerging-market peers increased to 92.6, its highest level since Dec. 16. as it breached its 200-day moving average.

The Australian dollar rose 1 percent to 93.60 U.S. cents after reaching 93.66 cents, the highest since Nov. 20. New Zealand’s currency jumped 0.9 percent to 86.77 cents. The South African rand gained 0.6 percent to 10.4638 per dollar after appreciating to 10.4144, the strongest since Jan. 1.

The pound rose by the most in eight weeks versus the dollar as a jump in industrial production spurred bets the Bank of England will hasten plans to raise interest rates.

Sterling appreciated to the strongest level in a month against the euro after a separate report showed wage growth accelerated to the fastest pace in almost seven years. Factory output rose 0.9 percent in February, compared with a 0.3 percent growth estimate of analysts in a Bloomberg News survey.

Sterling Confidence

“The market is becoming more confident on the outlook for sterling,” said Jane Foley, senior foreign-exchange strategist at Rabobank International in London. “There is a large consensus in the market regarding when the Bank of England will next move policy.”

The pound advanced 0.8 percent to $1.6747 after adding as much as 0.9 percent, the biggest gain since Feb. 12. The U.K. currency rose 0.4 percent to 82.39 pence per euro after reaching 82.33 pence, the strongest level since March 6.

The euro fell for a third week last week after ECB President Mario Draghi said the Governing Council was “unanimous” in exploring tools including asset purchases in an anti-deflation quantitative-easing program, prompting a surge in euro-area bonds.

Comments from other policy makers have since undermined that message. Draghi may offer more detail on plans at International Monetary Fund meetings in Washington starting on April 11.

‘Stable’ Growth

The Fed will release tomorrow the minutes of its March 18-19 meeting, when policy makers reduced monthly bond purchases by $10 billion to $55 billion. Fed Chair Janet Yellen said the central bank may start to increase interest rates “around six months” after ending its asset-buying program.

U.S. payrolls rose 192,000 last month, less than 200,000 gain predicted by economists in a Bloomberg News survey, the Labor Department reported on April 4.

“There’s nothing suggesting that employment growth is strengthening or weakening -- it’s kind of stable,” Robert Sinche, global strategist at Stamford, Connecticut-based Pierpont Securities LLC, said in a telephone interview. “A lot of what’s going on across all markets, whether it be rates markets, foreign-exchange markets or equity markets, is really taking some profits and closing down positions that were previously established.”

Stocks, Bonds

The Standard & Poor’s 500 Index of stocks erased its advance for the year yesterday after its biggest three-day decline since January. It gained 0.4 percent today. Treasury benchmark 10-year note yields touched a more than one-week low today.

The yen rose versus all of its 16 major peers as the Bank of Japan left its target for the yearly expansion of the monetary base at 60 trillion yen to 70 trillion yen. Policy makers next meet April 30.

The yen’s rally triggered stop-loss orders at about the 102 level, which spurred further yen gains, according to Sebastien Galy, a senior currency strategist at Societe Generale SA in New York.

To contact the reporter on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net

To contact the editors responsible for this story: Dave Liedtka at dliedtka@bloomberg.net Kenneth Pringle, Paul Cox

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