The dollar gained versus the euro and yen on speculation the Federal Reserve will trim the pace of its $85 billion in monthly bond purchases this month.
The greenback reached a eight-week high versus the 17-nation currency as the prospect for U.S. intervention in Syria increased demand for safer assets. The Australian and New Zealand dollars gained as China’s service industry expanded last month. The U.S. currency pared gains versus the euro and the yen yesterday after U.S. employers added fewer workers than forecast in August, even as surveys showed economists’ retained Fed taper projections. U.S. retail sales growth quickened last month according to economists’ forecasts before the Sept. 13 report.
“The market isn’t pricing out taper, even after the payroll data, which minimizes the damage to the dollar,” Greg Anderson, the head of global foreign-exchange strategy in New York at Bank of Montreal, said yesterday in a telephone interview. “There’s potential of a risk-off dollar rally over the next couple weeks with so much geopolitical risk.”
The dollar gained 0.3 percent to $1.3178 per euro this week in New York, after reaching $1.3105, its strongest since July 19. It climbed 1 percent to 99.11 yen after rallying beyond 100 and touching the highest since July 25. Japan’s currency dropped 0.6 percent to 130.63 per euro.
The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 other major currencies, depreciated 0.3 percent to 1,031.35.
New Zealand’s dollar was the biggest winner this week among the greenback’s major counterparts, with a 3.5 percent gain. The Swiss franc was the second-biggest loser, trailing only the yen, sliding 0.9 percent.
JPMorgan Chase & Co.’s G-7 Volatility Index reached 9.58 percent yesterday, the lowest intraday level since Aug. 19.
Traders increased bets the yen will weaken against the dollar, according to data from the Commodity Futures Trading Commission. The difference in the number of wagers by hedge funds and other large speculators on a decline in the currency compared with those on a gain -- known as net shorts -- was 79,761 on Sept. 3, compared with 78,353 a week earlier.
U.S. payrolls climbed 169,000 workers last month, trailing the 180,000 median forecast in a Bloomberg survey of 96 economists. Unemployment fell to 7.3 percent, the lowest since December 2008, as workers left the labor force.
Fed Chairman Ben S. Bernanke and his colleagues will reduce Treasury purchases to $35 billion from $45 billion at a Sept. 17-8 meeting while maintaining mortgage-bond buying at $40 billion, according to the median of 34 responses yesterday in a Bloomberg News survey of economists. That was unchanged from an Aug. 9-13 poll.
“Disappointing jobs data drove the U.S. dollar sharply lower,” Kathy Lien, managing director of foreign exchange at BK Asset Management, an investment advisory firm in New York, wrote yesterday in a client note. “However, the weak jobs number does not completely eliminate the possibility of a change in asset purchases this month.”
U.S. retail sales advanced 0.4 percent last month, compared with a 0.2 percent gain in July, according to the median in a Bloomberg survey of 53 economists before the Commerce Department report.
The Australian and New Zealand dollars gained versus all except one of their 31 most-traded counterparts as a report showed China’s services industry expanded last month. China is the biggest trade partner for both South Pacific nations.
Second-quarter gross domestic product in Australia advanced 0.6 percent from the previous three months, when it rose a revised 0.5 percent, a Bureau of Statistics report released in Sydney on Sept. 4 showed. The result compared with the median of 31 estimates in a Bloomberg survey for a 0.5 percent gain.
The Aussie appreciated 3.2 percent to 91.85 U.S. cents after touching 92.17, its strongest level since Aug. 19. New Zealand’s dollar gained 3.5 percent to 80 U.S. cents.
“The data coming out of China has been supportive of growth and sentiment,” Eric Viloria, senior currency strategist for Gain Capital Group LLC in New York, said in a Sept. 4 telephone interview. “That’s something that’s going to be a positive for the Australian dollar and other high-yielders.”
The euro weakened after European Central Bank President Mario Draghi said officials discussed an interest-rate cut at a Sept. 5 policy meeting. Draghi spoke after the ECB kept borrowing costs at a record-low 0.5 percent and said he would consider a further reduction if money-market rates climbed too high.
“Draghi is still not very confident about the economic recovery, and that’s contributing to the weakness in the euro,” Douglas Borthwick, head of foreign exchange at Chapdelaine & Co. in New York, said in a Sept. 5 telephone interview. “The market knows very well that the ECB is going to be on hold with a bias towards lower rates for the foreseeable future.”
The dollar has rallied 5.1 percent this year, the most among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes, while the euro rose 5 percent, the second-most. The Australian dollar dropped 8.4 and the yen slipped 9.5 percent to lead decliners.