Dollar Tumbles as Jobs Data Spur Fed Bets; Aussie Climbs

Dollar Remains Lower After Yellen Endorses Accommodative Policy
U.S. dollar bills are arranged for a photograph in New York, U.S. Photographer: Scott Eells/Bloomberg

The dollar fell versus most of its major peers as data showed the most Americans since January filed for jobless benefits last week, supporting the argument that monetary policy should stay stimulative to spur growth.

Australia’s currency rallied after employment increased more than economists forecast and China’s new yuan loans were the highest in a year. The greenback dropped after Federal Reserve Vice Chairman Janet L Yellen and New York Fed President William C. Dudley said U.S. borrowing costs will remain low following a report on April 6 that showed employers added the fewest jobs in March in five months.

“The initial jobless claims buttressed the original trend of the day of buying higher-yielding currencies and not the dollar,” said Ravi Bharadwaj, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co. “The Fed is intensely analyzing the latest employment results to see if it’s reflective of broader weakness or not, so they’re in the thick of it just as much as the market.”

The dollar slid 0.6 percent to $1.3188 per euro at 5 p.m. New York time and touched $1.3213, the weakest level since April 4. Japan’s currency dropped 0.6 percent to 106.68 per euro. The yen was little changed at 80.89 per dollar.

Stocks rose as investors sought higher-yielding assets, with the Standard & Poor’s 500 Index advancing 1.4 percent.

Yellen, Dudley

Intercontinental Exchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, dropped 0.5 percent after Yellen said yesterday additional debt purchases by the Fed may be warranted.

“Over the next several years, I anticipate that we will fall far short in achieving our maximum employment objective, and I expect inflation to remain at or below” the Fed’s 2 percent target, she said in a speech in New York.

Dudley said today in Syracuse, New York, that it’s “too soon to conclude that we are out of the woods, as underlined by the March labor-market release.” While he voiced concern that more bond purchases by the Fed could spark anxieties about inflation, he said he supports holding interest rates close to zero through late 2014.

The Fed bought $2.3 trillion of assets in two rounds of so-called quantitative easing from December 2008 to June 2011 to support the economy. It has held its benchmark interest rate in a range of zero to 0.25 percent since December 2008 and has pledged to keep it low through at least late 2014.

Jobs Data

The dollar extended losses against the euro after Labor Department data showed initial claims for U.S. unemployment benefits increased by 13,000 in the week ended April 7 to 380,000, the highest since Jan. 28. The median forecast in a Bloomberg News survey of economists was for 355,000. The department reported last week that U.S. nonfarm payrolls added 120,000 jobs in March, versus a forecast of 205,000.

“The U.S. data has slipped over the past couple of weeks and the Fed has seen it soften somewhat as well, and they are conscious of that and they are telling the market that, ‘Look, we’re keeping rates low for a very long time,’” said Blake Jespersen, managing director of foreign exchange in Toronto at Bank of Montreal.

The Australian currency climbed as the number of people employed rose by 44,000 last month. Economists surveyed by Bloomberg had forecast a gain of 6,500.

‘Positive Surprise’

Comments from Yellen “certainly helped, as did the positive surprise on the employment data in Australia,” said Adam Cole, global head of foreign-exchange strategy in London at Royal Bank of Canada’s RBC Capital Markets unit, in a telephone interview. “Australia is kind of a bellwether cyclical, and if Australia’s doing well then cyclical currencies and assets tend to do well. It was those two things taken together that are helping to support risk appetite.”

The Aussie strengthened 1.3 percent, the biggest jump since Jan. 3, to $1.0438. It rallied 1.4 percent to 84.44 yen.

In China, Australia’s largest trading partner, local-currency-denominated loans were 1.01 trillion yuan ($160.1 billion) in March, the People’s Bank of China said today. That exceeded all 28 estimates in a Bloomberg News survey, reassuring investors the nation may avoid a deep slowdown.

The yuan was little changed at 6.3074 per dollar. The central bank raised the currency’s reference rate by 0.05 percent to 6.2984 today, the strongest since March 30.

Rand, Kiwi Gain

The South African rand climbed 1.7 percent to 7.8722 per dollar. New Zealand’s currency, nicknamed the kiwi, advanced 1.2 percent to 82.78 U.S. cents, and the Canadian dollar appreciated 1 percent to 99.43 cents to the greenback.

The yen dropped versus most major peers as Bank of Japan Governor Masaaki Shirakawa said policy makers will “pursue powerful easing.” Defeating deflation and achieving sustained growth are important tasks for the central bank, Shirakawa said today in Tokyo. It unexpectedly expanded bond purchases by 10 trillion yen on Feb. 14 and set an inflation goal of 1 percent.

The yen has tumbled 8.3 percent over the past three months, the biggest decline among the 10 currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar was the second-worst performer with a 3.1 percent drop. The euro rose 1.2 percent.

The euro strengthened versus the dollar as Italy’s 10-year bonds rose for a second day, pushing yields down from an almost two-month high of 5.73 percent reached yesterday. The nation sold 4.88 euros ($6.4 billion) of securities, close to its 5 billion-euro maximum target for the sale.