Dollar Extends Longest Rally Since August Versus Yen

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DoubleLine Capital LP CEO Jeffrey Gundlach
Jeffrey Gundlach, Chief Investment Officer and Chief Executive Officer of DoubleLine Capital LP. Photographer: Patrick T. Fallon/Bloomberg

The dollar extended its rally versus the yen to six days, the longest since August, as a report showing the fewest initial jobless claims in 14 years countered bets the U.S. economy will suffer from sluggish global growth.

The Bloomberg Dollar Spot Index gained for a third day as the Federal Reserve Bank of Chicago’s national index of economic activity rose more than forecast, after a report yesterday showed an unexpected advance in consumer prices. The euro climbed versus Japan’s currency on a report showing manufacturing in the 18-nation bloc expanded. New Zealand’s dollar fell after inflation slowed. Norway’s krone advanced.

“Data in the U.S. this week continues to support the view that the U.S. continues to grow at higher rates compared to other areas of the world,” said Sireen Harajli, a Mizuho Bank Ltd. strategist in New York. “The overall theme of a stronger U.S. dollar, that has not really changed.”

The dollar climbed 1.1 percent to 108.27 yen at 5 p.m. New York time. The rally, which has boosted the dollar 2.2 percent, is the longest since a seven-day streak ended Aug. 26. The euro was little changed at $1.2646. The shared currency advanced 1 percent to 136.92 yen after adding 1.1 percent, the biggest gain since March 6.

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major counterparts, added 0.2 percent to 1,069.82, pushing its advance this year to 5 percent, the most since 2008.

Krone, Ruble

The Norwegian krone led gains versus the greenback after the Norges Bank kept its benchmark rate unchanged at 1.5 percent, in line with analyst estimates. The currency rose 0.5 percent to 6.5773 per dollar and 0.5 percent to 8.3180 per euro.

New Zealand’s currency fell the most of the U.S. dollar’s 31 major peers as the South Pacific nation’s annual inflation rate fell, prompting speculation policy makers will delay raising borrowing costs. The kiwi closed 1.3 percent lower at 78.23 U.S. cents, the biggest tumble since Oct. 3.

Turkey’s lira added 0.5 percent versus the dollar, the most among 24 emerging-market currencies, after its central bank held rates. Russia’s ruble dropped 0.7 percent, pushing its year-to-date loss to 26 percent.

The euro climbed versus the yen as reports showed the euro-area economy may have moved one step away from another contraction.

Yen Declines

A purchasing managers’ index for the manufacturing industry rose to 50.7 in October from 50.3 a month earlier, London-based Markit Economics said. Analysts surveyed by Bloomberg News predicted a drop to 49.9. A reading below 50 indicates contraction.

Bank of Japan Governor Haruhiko Kuroda said this month a weaker yen in line with the fundamentals of the economy is positive. He also said the BOJ will increase its unprecedented stimulus program if needed.

Japan sold three-month bills today at minus 0.0037 percent, with a government-debt sale drawing a negative yield for the first time. The yen is the second-biggest loser of the day versus the greenback.

The dollar has gained 6.7 percent in the past three months, the best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen lost 0.8 percent and the euro fell 0.5 percent.

‘Recovering’ Dollar

The rally in the U.S. currency is being driven by speculation the Fed is preparing to raise interest rates while policy makers in Japan and Europe will maintain or increase bond-buying programs to pump money into their economies. Futures contracts indicate the U.S. central bank will boost its benchmark rate by January 2016.

“The dollar’s certainly recovering,” said Robert Lynch, a currency strategist at HSBC Holdings Plc in New York. European factory data “may be working to undo some of those concerns about Germany, by extension about Europe, and there may be a less risk-off -- and concern about global growth -- environment.”

The dollar rose as the four-week average of jobless claims dropped to 281,000, the lowest since May 2000, from 284,000 the week before, a Labor Department report showed today in Washington. The reading for the week ended Oct. 18 climbed by 17,000 to 283,000, in line with the median forecast of 52 economists surveyed by Bloomberg.

The Chicago Fed’s national index was at 0.47 in September, versus an estimate of 0.15 and an August reading that was revised down to minus 0.25 from minus 0.21. The consumer price index climbed 0.1 percent after decreasing 0.2 percent in August, a Labor Department report showed yesterday.

“What we’re looking for is further consolidation in dollar strength,” said Mark McCormick, a foreign-exchange strategist in New York at Credit Agricole SA. “The Fed’s comfortable with the strength of the labor market. But I think the real issue is really where the slack in the labor market is.”

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