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Dollar Heads for Weekly Gain as Data Support Pace of Fed Taper

The dollar headed for weekly gains against the euro and the yen as improving economic data backed speculation the Federal Reserve will remove stimulus this year.

The greenback rose for a fifth day yesterday against a basket of peers after data showed manufacturing in the Philadelphia region grew at the fastest pace in seven months. Other figures showed the number of Americans filing for unemployment insurance payments hovered near a seven-year low, while an index of leading indicators next week is forecast to rise. Australia’s dollar headed for its worst week since January. Currency volatility sank to an almost seven-year low.

“The jobless claims and Philadelphia Fed reports were both good, and the dollar was bid on the back of that,” said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “If U.S. jobs numbers stay positive, the Fed will probably continue to taper at the current pace.”

The dollar was little changed at $1.3816 per euro at 10:52 a.m. in New York, set for a 0.5 percent weekly advance. It was unchanged at 102.42 yen after touching 102.57, the strongest level since April 8, and is set for a 0.8 percent advance since April 11. The euro traded at 141.46 yen from 141.44, and has strengthened 0.2 percent this week.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, was little changed at 1,010.39, after ending yesterday at 1,010.68, the highest closing level since April 7.

The Aussie was at 93.36 U.S. cents from 93.30 cents, set for a 0.7 percent decline this week, the most since the five days to Jan. 24. It touched 94.61 on April 10, the highest since Nov. 8.

Financial markets in the U.S., U.K., Germany, Hong Kong, Singapore, Australia and New Zealand are among those that are closed for a holiday today.

U.S. Economy

The Philadelphia Fed’s factory index increased to 16.6 in April, the highest since September, data showed yesterday. Initial jobless claims rose by 2,000 to 304,000 in the week ended April 12 from a revised 302,000 the prior period that was the lowest since September 2007, a Labor Department report showed.

The index of U.S. leading indicators probably rose 0.7 percent in March, the most since November, according to the median estimate of economists in a Bloomberg News poll before the data are released on April 21.

The Fed began tapering its monthly asset purchases in January, and economists predict the asset-purchase program will end in October.

Volatility Drops

Deutsche Bank AG’s Currency Volatility Index, based on three-month implied volatility on nine major currency pairs, closed at 6.52 percent yesterday, the lowest since July 2007.

The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, was little changed at 79.847, poised for a 0.5 percent gain this week.

The focus for the gauge will be resistance around 80.11 to 80.30, the 61.8 percent and the 76.4 percent Fibonacci retracement of its fall from the April 4 high of 80.60 to the April 10 low of 79.33, according to JPMorgan Chase & Co. Resistance refers to an area on a chart where orders to sell are clustered.

“The short term upside risks for the broad USD view remain intact,” Niall O’Connor, a technical analyst in New York at JPMorgan Chase & Co., wrote in a note yesterday. “The reversal from key support levels suggests additional retracement can develop in line with the current oversold setup.” Support refers to levels at which orders to buy accumulate.

To contact the reporters on this story: Kevin Buckland in Tokyo at kbuckland1@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

To contact the editors responsible for this story: Pavel Alpeyev at palpeyev@bloomberg.net Naoto Hosoda, Dave Liedtka

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