The Dollar Index gained for a fifth straight week, its longest rally since June, as employers added more jobs last month than forecast, signaling economic prospects for the U.S. exceeding other developed nations.
The euro touched its lowest level versus the greenback since December as European Central Bank policy makers said the region’s economy may shrink more than estimated and reduced their inflation forecast. The yen fell to the weakest level versus the dollar since 2009 as a report showed Japan’s current-account deficit widened and the incoming central bank chief endorsed buying longer-maturity bonds. A March 15 report may show U.S. consumer prices rose at a faster pace in February.
“The employment figure was really good and that reinforced our theme that the dollar is going to strengthen against other major currencies,” Sireen Harajli, a foreign-exchange strategist in New York at Credit Agricole SA, said in a telephone interview. “Growth rates in the U.S., while not perfect, are better than the U.K., Europe.”
The dollar rose 2.6 percent this week to 96 per yen in New York, touching the highest level since Aug. 12, 2009. It gained 0.1 percent to $1.3005 per euro, the fifth straight advance. The 17-nation currency appreciated 2.5 percent to 124.86 yen.
The Dollar Index, Intercontinental Exchange Inc.’s benchmark that tracks the greenback against the currencies of six major U.S. trading partners, reached its highest level since Aug. 3. It added 0.5 percent to 82.715. The weekly gains streak was the longest since the five days ended June 1.
Equities and the Dollar Index, which moved in opposite directions a year ago, showed the least divergence since 2008 last month. Against the MSCI World Index of stocks, the U.S. currency’s 60-day correlation moved to -0.34 in February, the least negative reading since 2008, from -0.90 in December 2011.
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.”
Hedge funds and other large speculators increased their bets that the euro will decline against the dollar, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers on a decline in the euro compared with those on a gain -- so-called net shorts -- was 26,116 on March 5, compared with net shorts of 9,394 a week earlier.
Mexico’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 peso strengthened 1 percent to 12.6279 per dollar, snapping two weeks of depreciation.
The yen weakened yesterday 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.
“We’re going to go toward 100 here,” Fabian Eliasson, vice president of corporate foreign-exchange sales at Mizuho Financial Group Inc. in New York, said in a telephone interview, of the yen against the dollar.
The ECB predicted on March 7 the 17-nation economy will shrink 0.5 percent this year, more than the 0.3 percent contraction forecast three months ago. The central bank also cut its 2014 inflation projection to 1.3 percent from 1.4 percent.
More than one ECB policy maker was in favor of cutting interest rates on March 6, said Ulo Kaasik, Deputy Governor of the Estonian central bank.
The euro has fallen 0.4 percent in the past month, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The yen weakened 1.3 percent and the dollar strengthened 2.7 percent.
U.S. gross domestic product is forecast to expand 1.8 percent in 2013 and 2.7 percent next year, compared with a 0.1 percent contraction and a 1.1 percent increase for euro-area countries, and 1 percent and 1.6 percent growth in the U.K., according to estimates of economists surveyed by Bloomberg. Japan’s economy may increase 1.2 percent and 1.3 percent.
U.S. employment rose 236,000 last month after a revised 119,000 gain in January that was smaller than first estimated, Labor Department figures showed yesterday. The median forecast of 90 economists surveyed by Bloomberg projected an advance of 165,000. The jobless rate dropped from 7.9 percent.
The consumer price index may have increased 0.5 percent in February after it was unchanged the month before, according to the median estimate of economists surveyed by Bloomberg.
Federal Reserve policy makers at their Jan. 30 meeting debated curtailing bond-buying, known as QE, which 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.
“We expect that the Fed will start tapering off QE at the end of this year,” Credit Agricole’s Harajli said. The U.S. “payroll figure is just a confirmation of that, whereas other central banks are starting to sound even more dovish.”