The dollar gained versus the yen to the highest level since 2009 as U.S. employers added more jobs than forecast last month, boosting optimism the economy is withstanding higher taxes and lower government spending.
The U.S. currency rallied against most of its major peers after the Labor Department reported the nation’s jobless rate unexpectedly fell to a four-year low of 7.7 percent. The greenback rose against its European counterpart as the improving employment data contrasts with the euro-area’s record 11.9 percent unemployment rate in January. The yen dropped against all its 16 major counterparts as a government report showed Japan’s current-account deficit widened in January.
“We’re starting to see a growing list of economic indicators suggesting that there’s a broad-based recovery taking place,” Omer Esiner, chief market analyst in Washington at the currency brokerage Commonwealth Foreign Exchange Inc., said in a telephone interview. “The market is now focusing on the notion that the U.S. recovery is gaining steam, while other major economies remain in a state of economic stagnation and contraction in many cases.”
The dollar rose 1.2 percent to 96 per yen at 5 p.m. in New York, reaching the highest level since Aug. 12, 2009. It gained 0.8 percent to $1.3005 per euro. The 17-nation currency added 0.5 percent to 124.86 per yen.
Mexico’s peso rose versus most of its major peers after the country’s central bank unexpectedly cut its benchmark interest rate yesterday for the first time since 2009 as inflation remains within the target range and growth slows. The currency gained 1 percent to 12.6279 per dollar after earlier adding as much as 1.1 percent, its biggest increase since Jan. 2.
Sweden’s krona fell the most in two weeks against the euro after Finance Minister Anders Borg said he’s unsure if the krona’s strength will last and that there may be “exaggerated confidence” in the currency. It weakened as much as 0.5 percent against the shared currency to 8.3353, the steepest retreat since Feb. 21, before trading at 8.3279.
The krona has gained 5.1 percent in this year, making it the best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar increased 3.3 percent, the euro climbed 1.6 percent and the yen depreciated 7.7 percent.
The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, reached its highest level since Aug. 3 as employment rose 236,000 last month after a revised 119,000 gain in January that was smaller than first estimated, Labor Department figures showed today in Washington.
The dollar is “holding its own at a time when equities are doing quite well and risk appetite is firming,” Richard Franulovich, senior currency strategist at Westpac Banking Corp. in New York, said in telephone interview. “It’s a potentially momentous correlation shift, whereby the dollar is now a growth currency.”
The median forecast of 90 economists surveyed by Bloomberg projected an advance of 165,000. The jobless rate dropped from 7.9 percent. The Dollar Index increased 0.8 percent to 82.712.
Federal Reserve policy makers at their last meeting debated curtailing bond-buying that is seen as debasing the dollar, a move Chairman Ben S. Bernanke has opposed as he seeks to drive down unemployment to 6.5 percent.
The larger-than-forecast increase in U.S. employment last month won’t prompt the Fed to alter the central bank’s stimulus measures, Bill Gross, manager of the world’s biggest bond fund, said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Mike McKee.
Pacific Investment Management Co.’s Gross said the U.S. economy may expand 3 percent this year, an increase from his firm’s most recent growth estimate of less than 2 percent.
The yen extended a second weekly loss against the dollar as the Ministry of Finance said the deficit in the current account, the widest measure of trade, increased to 364.8 billion yen ($3.8 billion) in January, up from 264.1 billion yen a month ago.
Japan’s currency has slumped 9.6 percent versus the dollar this year as Prime Minister Shinzo Abe pushed the central bank to add to stimulus to beat deflation. Haruhiko Kuroda, Abe’s pick to become the next Bank of Japan governor, told lawmakers this week the scale of the BOJ’s asset purchases was insufficient to achieve its target of 2 percent inflation.
The yen may be due to reverse course, according to a technical indicator. The currency’s 14-day relative strength index versus the dollar fell below 30 today, a level that may signal an asset has fallen too far, too quickly.
“Most of the Japanese weakness is behind us,” Vassili Serebriakov, a foreign-exchange strategist at BNP Paribas SA in New York, said in an interview on Bloomberg Television’s “Lunch Money” with Scarlet Fu. “The next thing to see is whether the BOJ can actually deliver higher inflation down the road. We think that might be a little difficult.”
The euro is estimated to trade at $1.30 at the end of the year, while the yen is forecast to be about 96 per dollar, according to the median estimate of economists surveyed by Bloomberg.