Dollar Gains as U.S. Adds More Jobs, Damping Fed Easing Outlook

The dollar gained, recovering from an almost postwar low against the yen, after U.S. employers added more jobs than forecast, damping speculation the Federal Reserve will add another round of asset purchases to spur growth.

The Japanese currency dropped, after trading within one yen of its post-World War II high versus the dollar, reducing speculation the nation will intervene in the currency market to stem its appreciation. The Fed’s last two debt-purchase programs, known as quantitative easing, boosted riskier assets as investors shunned low yields in the U.S. Higher yielding currencies led by South Africa’s rand and Mexico’s peso rose as stocks and commodities gained.

“It does diminish the possibility for further easing,” said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. “Higher Treasury yields helped the dollar against the yen and euro, while stronger equities hurt the dollar against commodity and emerging currencies.”

The dollar rose 0.5 percent to 76.60 yen at 5 p.m. in New York. It touched 76.05 yesterday, close to a record low of 75.35 reached Oct. 31. The dollar fell 0.1 percent to $1.3158 per euro after earlier strengthening to $1.3066. The euro rose 0.6 percent 100.79 yen.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, was little changed at 78.943.

The rand added 1.6 percent to 7.5218 per dollar, extending its gain this week to 3.1 percent. The peso rallied 1.1 percent to 12.6596 against the greenback. The U.S. is Mexico’s largest trading partner.

Nonfarm Payrolls

The Standard & Poor’s 500 Index rose 1.5 percent and the Thomson Reuters/Jefferies CRB Index of raw materials gained 1.1 percent.

Nonfarm payrolls rose by 243,000, after a revised 203,000 gain in December, the Labor Department reported today in Washington. The median of 89 economists in a Bloomberg Survey had forecast an addition of 140,000. The unemployment rate fell to 8.3 percent.

At a meeting last month, the Federal Reserve pledged to keep its interest rate near zero until late 2014. The accommodative policy tends to drive investors away from the dollar as they seek higher yields elsewhere.

Three Fed officials said rates should be increased in 2012, three said 2013, five said 2014, four said 2015 and two said 2016.

Quantitative Easing

The central bank purchased $2.3 trillion of Treasury and mortgage-related bonds in two rounds of quantitative easing that ended in June. It sold $8.61 billion of securities due from May to November today as part of a program to replace $400 billion of shorter-maturity Treasuries in its holdings with longer-term debt to cap borrowing costs.

Treasuries fell today, pushing 10-year note yields up as much as 13 basis points to 1.954 percent, the biggest intraday jump since Nov. 10.

Fed Chairman Ben S. Bernanke said yesterday the economy has shown “signs of improvement” while remaining vulnerable to shocks, and he called on lawmakers to reduce the long-term U.S. budget deficit.

“Fortunately, over the past few months, indicators of spending, production, and job-market activity have shown some signs of improvement,” Bernanke said in testimony to the House Budget Committee in Washington. “The outlook remains uncertain, however, and close monitoring of economic developments will remain necessary.”

Quickening Pace

Data this year have signaled the U.S. economy is recovering at a quickening pace. Manufacturing grew in January at the fastest pace in seven months, the Institute for Supply Management reported Feb. 1. Consumer confidence rose last month to the highest level in almost a year, according to a Thomson Reuters/University of Michigan index published Jan. 27.

Japan’s Finance Minister Jun Azumi has said he will take decisive steps against one-sided moves in the yen if needed. The currency’s level doesn’t reflect economic fundamentals, and falling U.S. interest rates are increasing speculative yen buying, he told reporters in Tokyo. Japan sold the yen on Oct. 31 on concern its advance to a record would hurt exporters.

“The pressure to intervene in the yen is receding with each rally in dollar-yen,” said Kathy Lien, director of currency research at the online trading firm GFT Forex in New York.

ECB, Greece

The yen has gained 5.1 percent over the past six months, the third-best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 6.2 percent and the Australian dollar gained 5.8 percent. The euro dropped 3 percent.

The euro erased losses after the European Central Bank was said to be considering using its bond holdings to bolster Greece’s next rescue program and support efforts to contain the sovereign-debt crisis.

The 17-nation shared currency headed for a weekly decline against 15 of its 16 most-traded peers as finance ministers from the euro region’s top-rated countries, meeting in Berlin, didn’t discuss a higher public sector contribution for Greece, reflecting reluctance to place bigger burdens on their taxpayers.

“The continuing uncertainty in Greece has contributed to a slightly weaker euro this week,” said Michael Derks, chief strategist at broker FXPro Financial Services Ltd. in London.

Loonie Rises

Morgan Stanley cut its fourth-quarter 2012 forecast for the euro to $1.15 from a previous projection of $1.20, according to a research note published yesterday, saying efforts to control government budgets will push the region into a recession.

The Canadian currency appreciated even after the nation’s unemployment rate increased. The loonie rose 0.6 percent to 99.34 Canadian cents per U.S. dollar after touching 99.28 cents, the strongest since Oct. 31.

The nation’s jobless rate rose to 7.6 percent from 7.5 percent as employment increased by 2,300 last month, Statistics Canada said today. Economists surveyed by Bloomberg News had forecast unemployment to stay at 7.5 percent and 22,000 jobs to be added.

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