The Dollar Index approached the highest level since August before a U.S. report forecast to show payrolls increased in March, underpinning optimism the world’s biggest economy is recovering.
The yen rose against most of its major counterparts amid speculation its slide yesterday when the Bank of Japan expanded monetary stimulus was too rapid. The euro weakened after retail sales in the 17-nation area dropped in February, adding to signs the region is struggling to recover from recession. South Korea’s won fell to a seven-month low against the dollar as the risk of conflict with North Korea spurred capital outflows.
“The dollar is becoming more of a pro-cyclical currency,” said Ian Stannard, head of European currency strategy at Morgan Stanley in London. “If we get a positive surprise from U.S. payrolls we are likely to see the dollar regaining ground and it could be the catalyst for a move higher against the yen.”
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, gained 0.1 percent to 82.769 at 7:05 a.m. in New York after rising to 83.494 yesterday, the highest level since Aug. 2.
The dollar rose 0.1 percent to $1.2921 per euro after rising to $1.2746 yesterday, the strongest level since Nov. 21. The yen gained 0.1 percent to 96.27 per dollar, after slumping 3.4 percent yesterday. Japan’s currency appreciated 0.2 percent to 124.40 per euro.
U.S. employers added 190,000 workers last month after taking on 236,000 in February, according to a Bloomberg News survey before the Labor Department reports the number at 8:30 a.m. in Washington. The jobless rate held at 7.7 percent, the lowest level since December 2008, a separate survey showed.
Federal Reserve Vice Chairman Janet Yellen said yesterday she was encouraged by recent progress in the U.S. economy.
There are “signs that the economy is improving and healing from the trauma of the crisis,” she said in a speech in Washington. “Housing is really beginning to recover in a way that I think is very convincing.”
The yen rallied today after tumbling at least 3 percent versus all 16 of its major counterparts yesterday when the BOJ said it would double the monetary base by the end of 2014. Policy makers also temporarily suspended a cap on some bond holdings and dropped a limit on debt maturities at the two-day meeting in Tokyo.
“It’s just jittery markets overall but with the BOJ having delivered much more than most had expected, the bias short-term in dollar-yen is higher,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong.
The yen has slumped 18 percent in the past six months, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation Weighted Indexes. The euro gained 1.2 percent and the dollar gained 2.3 percent.
The euro pared weekly gains versus the yen and dollar after the European Union’s statistics office said retail sales in the currency bloc fell 0.3 percent in February from the previous month and 1.4 percent versus a year earlier.
European Central Bank President Mario Draghi said yesterday officials “stand ready to act” to bolster the flagging economy, while keeping borrowing costs at a record-low 0.75 percent at a policy meeting in Frankfurt.
“Data-wise things are still going to be very weak within Europe and that is going to keep the ECB in a dovish mode,” Morgan Stanley’s Stannard said. “In the longer term we are bearish and think the weak data will catch up with the euro.”
The won declined for a second day after North Korea said yesterday it passed a law authorizing “counter-actions” against U.S. aggression including a nuclear strike.
“Geopolitical risks have been significantly magnified this week, triggering selloffs of South Korean assets as investors were unsure how the situation would develop under the new leader of the communist state,” said Han Sang Soo, a money manager at Samsung Asset Management Co., which oversees about $114 billion.
The won slid 0.7 percent to close at 1,131.69 per dollar in Seoul after falling to 1,131.73, the weakest since Sept. 6.