Dollar Snaps Gain Versus Yen Before Fed Officials Speak Tomorrow

The dollar snapped a two-week gain versus the yen before Federal Reserve officials speak amid signs the world’s biggest economy may be strong enough for the central bank to taper monetary stimulus.

The U.S. currency was supported last week by jobs data that topped economist forecasts, pushing up Treasury yields. Fed Bank of Minneapolis President Narayana Kocherlakota and Atlanta counterpart Dennis Lockhart will speak tomorrow. The euro was near a 10-month low against the pound before data on Wednesday that analysts said will show factory output declined in the currency bloc and after an unexpected interest-rate cut by the European Central Bank last week.

“We expect the dollar to strengthen gradually as U.S. monetary policy is normalized,” said Daisaku Ueno, chief currency strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “The ECB still retains a policy guidance that’s inclined toward a further rate cut.”

The dollar was little changed at 99.03 yen at 8:44 a.m. in London after strengthening 1 percent on Nov. 8. The U.S. currency fell 0.1 percent to $1.3384 per euro. The euro rose 0.1 percent to 132.54 yen.

Kocherlakota will speak on monetary policy and will take questions following his address. He said on Oct. 17 that officials must do “whatever it takes” to push for a faster return to full employment while keeping inflation near 2 percent, including possibly providing more stimulus.

Lockhart said Nov. 8 the Fed will consider reducing its bond-buying program at next month’s policy meeting.

Extra Jobs

U.S. employers added 204,000 workers in October, compared with a Bloomberg News survey median for a 120,000 increase, the Labor Department said Nov. 8.

The dollar has strengthened 1 percent in the past month, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The yen advanced 0.5 percent, while the euro weakened 0.3 percent.

Euro-area industrial output fell 0.3 percent in September from a month earlier when it rose 1 percent, according to a separate Bloomberg survey before the data is released.

The ECB cut its main refinancing rate on Nov. 7 to 0.25 percent from 0.5 percent with ECB President Mario Draghi saying the currency bloc risks a “prolonged period” of low inflation.

Trade Deficit

Japan recorded a seasonally-adjusted current account deficit of 125.2 billion yen in September, the most in data going back to 1985, a Ministry of Finance report today showed.

Ministry data also showed Japanese investors increased holdings of U.K. sovereign debt by 184 billion yen in September, the most in two years. They sold a net 173.7 billion yen of Netherlands’ bonds, the biggest drop in a year.

Their holdings of Treasuries rose for a third month, the longest run since the four months ended March 2012, climbing by a net 1.26 trillion yen, according to the figures.

The pound was little changed versus the dollar and euro before the Bank of England releases its quarterly inflation report this week.

Bank of England Governor Mark Carney will present economic projections at his second quarterly inflation report on Nov. 13, with Goldman Sachs Group Inc. among those forecasting the central bank will improve its outlook. U.S. bond markets are closed today.

Sterling fell 0.2 percent to 83.59 pence per euro after appreciating to 83.01 pence on Nov. 7, the strongest level since Jan. 17. The U.K. currency was at $1.6012.

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