Dollar Drops to Lowest in 5 Months as Yen Gains; Krona Slides

The dollar fell to a five-month low against a basket of peers on speculation a drop in initial jobless claims won’t be enough for the Federal Reserve to accelerate plans to raise interest rates.

The yen gained to the strongest in three weeks against the greenback as an unexpected decline in Chinese exports revived demand for safer assets. Sweden’s krona slumped after a government report showed consumer prices dropped twice as much as economists predicted. The Australian dollar increased on jobs gains. The Bloomberg Dollar Spot Index’s slump reached five days as stocks tumbled and Treasury yields fell to four-week lows.

“It’s a continuation of what’s happening in the past four days,” Richard Franulovich, chief currency strategist for the northern hemisphere at Westpac Banking Corp. in New York, said in a telephone interview. “That’s linked to the risk aversion that’s been happening in U.S. equities, and bonds yields have been coming lower.”

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major counterparts, fell 0.1 percent to 1,005.16 as of 5 p.m. in New York after touching 1,004.01, the lowest level since Oct. 30.

The yen advanced 0.5 percent to 101.53 per dollar after appreciating to 101.33, the strongest level since March 19. Japan’s currency gained 0.2 percent to 140.99 per euro. The dollar fell 0.2 percent to $1.3886 after sliding to $1.3899, the weakest since March 19.

The Standard & Poor’s 500 Index dropped 2.1 percent, its biggest drop in two months, to erase a two-day rally. Benchmark 10-year note yields touched 2.61 percent, the lowest level since March 14.

Krona, Aussie

The krona weakened against all except two of its 16 major peers as Statistics Sweden said consumer prices fell 0.6 percent in March from a year earlier. Economists surveyed by Bloomberg predicted a decline of 0.3 percent.

The krona slipped 1 percent to 9.0742 per euro after depreciating to 9.0823, the weakest since Dec. 17. The currency declined 0.8 percent to 6.5347 per dollar.

Australia’s dollar rose for a third day as the statistics bureau said employers added 18,100 jobs compared with the median forecast for 2,500 in a Bloomberg survey. The jobless rate fell to 5.8 percent, the lowest level since November and the first decline in six months.

“The unemployment rate is really key here, and the employment growth figure was solid as well,” said Greg Gibbs, head of Asia Pacific markets strategy at Royal Bank of Scotland Group Plc in Singapore. “The Australian dollar has benefited.”

The Aussie advanced 0.2 percent to 94.13 U.S. cents after rising to 94.61 cents, the highest level since Nov. 8.

Yen’s Advance

Japan’s currency gained against all of its 16 major peers as China’s exports fell 6.6 percent from a year earlier, the customs administration said, attributing the decline partly to distortions from inflated data in early 2013. Imports dropped 11.3 percent, leaving a trade surplus of $7.71 billion.

The yen has gained 2.6 percent this year, the third-best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro weakened 0.4 percent and the dollar slumped 1.5 percent.

“The yen is still strongly correlated negatively with U.S. stocks,” Shaun Osborne, chief currency strategist at Toronto-Dominion Bank, said by phone from Toronto. “Given the focus on valuation, and the potential for a bit of a setback in equities, given the focus on Fed policy, we would expect risk assets to experience a few more headwinds once it’s clear that the Fed is continuing with tapering.”

Jobless Claims

The dollar briefly pared a decline against the yen after jobless claims decreased by 32,000 to 300,000 in the week ended April 5, the lowest since May 2007, a Labor Department report showed today in Washington. The figure was lower than the most optimistic forecast in a Bloomberg survey of 52 economists. The median estimate called for 320,000 claims.

“That’s a good set of data points -- that’ll give the market more confidence about the jobs market in the second quarter,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “But I don’t think it’s enough to break the negative theme short-term.”

The Fed in the minutes of its March 18-19 meeting played down predictions by some of its own policy makers that interest rates might rise faster than they had forecast earlier.

“Several participants noted that the increase in the median projection overstated the shift in the projections,” according to the minutes of the Federal Open Market Committee. Some expressed concern the rate forecasts “could be misconstrued as indicating a move by the committee to a less accommodative reaction function,” the minutes showed.

Fed Chair Janet Yellen said last month the central bank may start to increase interest rates “around six months” after ending its asset-buying program. Policy makers cut monthly bond purchases by $10 billion to $55 billion in March.

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