The euro strengthened above $1.27 for the first time since June amid optimism a bond-purchase program announced by the European Central Bank will help contain the region’s debt crisis.
The 17-nation currency climbed to a two-month high versus the yen after German exports and industrial production for July both beat economists’ forecasts. The dollar fell against most major counterparts before a U.S. monthly payroll report, after industry data yesterday showed American companies hired more workers last month than analysts predicted. The Swiss franc fell to the weakest since January against the euro.
“There’s increased positivity in Europe,” said Paul Robson, a senior currency strategist at Royal Bank of Scotland Group Plc in London. If payrolls are “a good number, the market will reduce its expectation of QE and we get a more positive dollar,” he said, referring to the Federal Reserve’s bond purchases known as quantitative easing.
The euro climbed 0.6 percent to $1.2712 at 7:37 a.m. New York time, rising above $1.27 for the first time since June 21. The common currency advanced 0.8 percent to 100.36 yen after appreciating to 100.43, the most since July 4. The dollar gained 0.2 percent to 78.95 yen.
ECB President Mario Draghi said yesterday the central bank will target government bonds with maturities of between one and three years through its Outright Monetary Transaction scheme. The purchases will be fully sterilized, meaning the impact on money supply will be neutral, and the ECB will not have seniority, he said.
“The ECB’s Outright Monetary Transaction scheme has continued to bolster perceptions that officials are moving to reduce tail risk,” strategists at Brown Brothers Harriman & Co., led by Marc Chandler in New York, wrote in a note to clients. “The dollar is broadly weaker on the day as positive risk sentiment continues to grip markets.”
German exports rose 0.5 percent from June, when they fell 1.4 percent, the Federal Statistics Office said. Economists surveyed by Bloomberg forecast a 0.5 percent decline. Industrial production in Europe’s largest economy climbed 1.3 percent from June, when it dropped 0.4 percent, the Economy Ministry said.
The Stoxx Europe 600 Index of shares rose for a third day, gaining 0.5 percent. Spanish and Italian bonds advanced, with Spain’s 10-year yield dropping below 6 percent for the first time in four months.
The euro strengthened 1 percent in the past week, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen weakened 0.9 percent, and the dollar dropped 0.1 percent.
The Dollar Index declined for a third day before today’s U.S. payrolls report.
American employers hired 130,000 workers last month, after adding 163,000 in July, according to a Bloomberg News survey before the Labor Department data. Companies created 201,000 jobs in August, ADP Employer Services said yesterday, exceeding the 140,000 gain forecast by economists in another Bloomberg survey.
The policy-setting Federal Open Market Committee meets Sept. 12-13. Fed Chairman Ben S. Bernanke said on Aug. 31 at a conference in Jackson Hole, Wyoming, that the costs of “nontraditional policies” appeared manageable when considered carefully. He said he wouldn’t rule out steps to lower a jobless rate he described as a “grave concern.”
“There’s a good chance the Fed will announce QE3 this month,” said Noriaki Murao, a managing director in New York at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest financial group by market value. “With lingering expectations of Fed stimulus, the dollar would be on the back foot.”
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against those of six U.S. trading partners, dropped 0.3 percent to 80.78.
Switzerland’s franc declined for a fifth day against the euro as demand for safer investments waned.
The currency dropped 0.8 percent to 1.2148 per euro after depreciating to 1.2155, the weakest level since Jan. 9.
The Swiss National Bank put a cap of 1.20 per euro on the franc in September 2011 to limit its strength after investors sought the currency as a haven from the euro-area’s debt crisis.