The euro slumped to a two-year low as reports showing economic growth in the U.S. contrasted with weak data from Europe, amplifying calls for European Central Bank President Mario Draghi to unveil further easing tomorrow.
The dollar touched a seven-year high against the yen as the Federal Reserve said “employment gains were widespread across districts” after a gauge of U.S. service industries expanded at the second-fastest pace in nine years. The greenback reached the strongest in four years versus the Aussie as Goldman Sachs Group Inc. joined Deutsche Bank AG in predicting an interest-rate cut for Australia. Russia’s ruble bounced from a record low amid speculation the central bank intervened to support the currency.
“Draghi has set up the market to say he’s going to do more,” Peter Gorra, head of foreign-exchange trading in New York at BNP Paribas SA, said by phone. “It’s going to be unusual for him to say, ‘actually, I didn’t mean it.’ I’ll stick with euro as the trade,” he said, selling it versus the dollar.
The euro tumbled 0.6 percent to $1.2311 as of 5 p.m. New York time, touching the weakest level since August 2012. The dollar rose 0.5 percent to 119.79 yen and reached 119.87, the highest since July 2007. The euro weakened 0.1 percent to 147.48 yen.
Russia’s ruble was the biggest gainer of the U.S. currency’s 31 major peers, adding 1.5 percent to snap six days of losses.
The Bank of Russia said today it sold $700 million on Dec. 1, its first intervention since moving to a free float almost a month ago. It probably spent about $600 million to $1 billion defending the ruble today, according to Alexander Myulberger, the head of foreign-exchange trading at BCS Financial Group in Moscow.
South Africa’s rand fell 0.9 percent to pace decliners.
Sweden’s krona touched a four-year low as Prime Minister Stefan Loefven said he will call a early election next year after failing to win support for his budget.
Australia’s dollar weakened after gross domestic product rose less than forecast. Goldman Sachs said it expects the central bank to lower rates to 2 percent next year, from the current record-low 2.5 percent, following a Deutsche Bank forecast for a cut.
The Aussie dropped 0.5 percent to 84.05 U.S. cents, after reaching 83.89 cents, the least since July 2010. New Zealand’s dollar weakened 0.6 percent to 77.59 U.S. cents, extending yesterday’s 0.8 percent decline.
The dollar advanced as the Fed said in its Beige Book business survey “that contacts remained optimistic about the outlook for future economic activity.” Consumer spending continued to rise in most regions, helped in part by lower oil prices, it said. The survey is based on reports gathered on or before Nov. 24.
The Institute for Supply Management’s U.S. non-manufacturing index rose to 59.3 last month, the second-highest level since August 2005, from 57.1 in October. U.S. employers added 208,000 jobs in November, following a revised 233,000 gain the prior month, a report from Roseland, New Jersey-based ADP Research Institute showed. The Bureau of Labor Statistics releases data Dec. 5.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 trading partners, added 0.3 percent to 1,114.06, its highest close since March 2009.
The shared currency fell today as a composite Purchasing Managers Index fell to 51.1 from 52.1 in October, London-based Markit Economics said today. The reading is the lowest in 16 months and points to economic growth of just 0.1 percent this quarter, according to Markit.
“The market’s getting prepared for at least a very dovish ECB,” said Mark McCormick, a foreign-exchange strategist in New York at Credit Agricole SA. “The euro’s going to weaken pretty substantially against the dollar in 2015.”
The ECB gathers tomorrow to discuss monetary policy after cutting rates to a record low and initiating purchases of asset-backed securities and covered bonds at previous meetings. Further unconventional measures may include buying sovereign bonds, President Mario Draghi said last month.
The euro has dropped 2.6 percent this year among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar added 10.1 percent while the yen fell 4.6 percent.
“Expectations for ECB action have risen,” said Brian Daingerfield, a currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford, Connecticut. “Monetary-policy divergence is still very much the theme and euro-dollar is at new lows as we head into the meeting.”