Dollar Rises to Highest in 14 Months on Fed Speculation

A dollar gauge rose to a 14-month high amid speculation the Federal Reserve will increase U.S. interest rates by the middle of next year.

The pound climbed versus its 16 major peers after a second poll in two days showed supporters of Scottish independence lost ground a week before a vote that could lead to the breakup of the U.K. Canada’s dollar fell as data signaled the housing market is fading as a driver of economic growth. The dollar fell earlier versus the euro after the number of Americans filing for first-time jobless benefits unexpectedly climbed before the Fed meets next week.

“We’re going to have weekly variations, but the reality is the labor market has recovered,” Andrew Wilkinson, chief market analyst at Interactive Brokers LLC, said in a phone interview from Greenwich, Connecticut. “I very much doubt one granular piece of data is going to change anything.”

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major counterparts rose 0.3 percent to 1,049.84 at 5 p.m. New York time. It touched 1,049.94, the highest since July 2013. It was the fourth daily gain for the gauge, which fell briefly after the U.S. employment data.

The dollar was little changed at $1.2925 per euro after weakening earlier as much as 0.3 percent. The U.S. currency gained on Sept. 9 to $1.2860, the strongest since July 2013. It rose 0.2 percent today to 107.11 yen and reached 107.20, the highest since September 2008. The single currency rose 0.3 percent to 138.43 yen.

BNP Paribas SA cut its year-end euro forecast to $1.25, from $1.32, after the currency dropped last week following further European Central Bank action to spur a slumping economy. The ECB cut interest rates Sept. 4 and said it will purchase asset-backed securities.

Pound Gains

The pound extended gains after the latest YouGov Plc survey before the Sept. 18 Scottish vote showed 52 percent support for the “no” campaign, a four percentage-point lead over independence supporters. A YouGov poll last week put the “yes” camp ahead for the first time, sending the currency tumbling.

Sterling rose earlier after a Survation poll for the Daily Record newspaper in Glasgow yesterday showed 53 percent opposed to independence and 47 percent favoring the “yes” campaign.

The pound gained 0.3 percent to $1.6255 after adding 0.7 percent in the past two days. The U.K. currency slid to as low as $1.6052 yesterday, the least since November.

The Canadian dollar sank to the weakest since April as data showed home prices stalled in July and crude oil dropped as much as 1.4 percent to $90.43 per barrel in New York, the lowest since May 2013, before rising, according to data compiled by Bloomberg.

Currency Performance

The loonie, as the Canadian dollar is called for the image of the aquatic bird on the C$1 coin, weakened 0.9 percent to C$1.1035 per U.S. dollar and reached C$1.1059.

The currency has gained 2.5 percent in the past three months, the second-best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The greenback was the biggest winner, gaining 4.3 percent, while the euro lost 0.9 percent and the yen fell 1.1 percent.

The yen reached the weakest level in almost six years against the dollar after Bank of Japan Governor Haruhiko Kuroda told Prime Minister Shinzo Abe today the central bank won’t hesitate to act if it risks missing its inflation target.

Both the government and the BOJ have signaled readiness to increase stimulus to offset any economic drag from a proposed increase in the consumption tax next year, which would be the second rise in the levy in 15 months.

U.S. Economy

Initial jobless claims in the U.S. climbed by 11,000 to 315,000 in the week ended Sept. 6, which included the Labor Day holiday, Labor Department data showed. It was the highest since June 28. A Bloomberg survey forecast 300,000.

U.S. employers added 142,000 jobs in August, a report showed last week, after increasing hiring by more than 200,000 positions a month since February. The jobless rate fell to 6.1 percent, versus a 26-year high of 10 percent in October 2009.

The Fed, which meets Sept. 16-17, is considering the timing of its first interest-rate increase since 2006 and whether to revamp its public guidance on the path of rates. The central bank has said since March rates would stay low for a “considerable time” after it completes monthly bond-buying intended to spur economic growth. Purchases are on track to end this year.

“The market position in dollar is very long -- if you do have a little bit of selloff, some long positions get squeezed out of the market,” Fabian Eliasson, who works in foreign-exchange sales at Mizuho Financial Group Inc. in New York, said by phone. “In the medium term, I don’t have any doubt the dollar will go higher. The Fed meeting really is the focus.” Long positions are bets a currency will gain.

There’s a 61 percent chance policy makers will raise the target interest trade to at least 0.5 percent by July 2015, futures trading shows. The likelihood was 52 percent at the end of August. The Fed has held the benchmark rate target in a range of zero to 0.25 percent since 2008 to support the economy.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE