The dollar strengthened the most in a month as nonfarm-payrolls gains that exceeded estimates boosted speculation the Federal Reserve may bring forward the timing of interest-rate increases.
The U.S. currency rose to a two-week high versus the yen as the prospect of higher borrowing costs set the U.S. apart from other nations that are adding to currency-debasing stimulus measures to boost growth. The krona plunged after a larger-than-forecast cut in Swedish interest rates, while Australia’s dollar tumbled as the Reserve Bank governor said it was “overvalued.” The euro fell after European Central Bank President Mario Draghi reiterated that he’ll keep rates low.
“The NFP, ECB meeting and Riksbank -- all of that lends to the same strong-dollar story,” Fabian Eliasson in foreign-exchange sales at Mizuho Financial Group Inc. in New York said in a telephone interview. “You still need to see more consistent data points to support a stronger dollar in the long run.”
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, rose 0.2 percent to 1,007.05 at 5 p.m. New York time. It gained as much as 0.4 percent, the biggest intraday jump since June 2.
The greenback strengthened 0.4 percent to 102.19 yen and touched 102.27, the strongest since June 18. Europe’s 18-nation shared currency declined 0.4 percent to $1.3610 and was little changed at 139.09 yen.
Foreign-exchange volatility ebbed, with JPMorgan Chase & Co.’s gauge tracking Group of Seven nations dropping to 5.18 percent, the lowest on record on a closing-market basis in data going back to 1992.
The risk of higher U.S. interest rates contrasts with Sweden’s steps to help boost inflation and currency-debasing policies around the world as officials grapple with anemic global growth. The ECB introduced a package of measures to ward off the threat of deflation in the euro area last month and the Norwegian krone had its biggest drop in almost a year on June 19 after its central bank said it may have to cut interest rates.
The Riksbank, Sweden’s central bank, lowered its benchmark rate by 0.5 percentage point to 0.25 percent today, after analysts had projected a 0.25 percentage-point reduction. Policy makers predicted no increases in borrowing costs until the end of next year.
“If you deviate a lot from global monetary policy and try to run your own independent monetary policy, you run the risk of a stronger currency,” said Carl Hammer, chief foreign-exchange strategist at SEB AB in Stockholm. The Riksbank wants “to engineer a weaker currency,” he said. “This was massively more dovish than what most people in the market expected.”
The krona slid 1.4 percent to 9.2859 per euro and reached its biggest decline since November 2013. Sweden’s currency touched 9.3887, the weakest level in almost three years. The krona dropped 1. percent to 6.8232 per dollar.
The Australian dollar sank 1 percent to 93.47 U.S. cents, after a rally took it to 95.05 on July 1, the strongest level since Nov. 7.
Investors are underestimating the probability of a “significant fall” in the Aussie at some point, Reserve Bank of Australia Governor Glenn Stevens said. “Most measurements would say it is overvalued, and not just by a few cents,” he said in a speech in Hobart today. Policy makers on July 1 held the interest rate unchanged at a record-low 2.5 percent, where it’s been since August.
The ECB kept the main refinancing rate at 0.15 percent today after a cut last month, as predicted by all 54 analysts in a Bloomberg survey.
“It’s pretty certain that the ECB will leave rates low for at least a couple of years,” Lennon Sweeting, a San Francisco-based dealer at the broker and payment provider USForex Inc., said in a phone interview. “Interest rates in Europe will lag rate hikes at the Fed or Bank of England, and with that said, euro-U.S. and euro-sterling should go lower.”
U.S. employers added 288,000 workers in June, more than the 215,000 median forecast of 94 economists surveyed by Bloomberg. The unemployment rate dropped to an almost six-year low of 6.1 percent, from 6.3 percent.
Treasuries declined after the jobs data, while the Dow Jones Industrial Average rose above 17,000 for the first time.
“These kind of numbers are the ones that have to get some attention even at the Fed,” said Robert Sinche, a global strategist at Stamford, Connecticut-based brokerage Pierpont Securities LLC. “It’s a well-deserved increase in the dollar, although I think there’s a lot more to go.”
The U.S. central bank has trimmed monthly buying to $35 billion from $85 billion last year, while holding the key interest-rate target in a range of zero to 0.25 percent since 2008 to support the economy.
(An earlier version of this column corrected a reference in the headline to the krona.)
To contact the reporter on this story: Andrea Wong in New York at firstname.lastname@example.org