The dollar weakened against the yen, ending a five-day advance, amid speculation its recent climb was too rapid.
The greenback pared declines after fewer Americans than forecast filed applications for unemployment benefits last week. The dollar has advanced at least 4 percent against all its 16 major counterparts this year and extended gains yesterday after a report showed the world’s biggest economy grew at the fastest pace in more than a decade. Taiwan’s dollar slid to a four-year low. The ruble gained a fourth day.
“The dollar has trended lower in thin holiday trading, though the greenback is on course to end 2014 on a strong note,” BNP Paribas SA’s Steven Saywell, global head of foreign-exchange strategy, and other analysts wrote in a note to clients. It will post “year-to-date gains well into the double digits.”
The dollar declined 0.2 percent to 120.51 yen at 5 p.m. New York time after rising to 120.83 yen yesterday, the highest since Dec. 9. It gained 3.7 percent during the five-day streak. The U.S. currency weakened 0.2 percent to $1.2196 per euro after touching $1.2165 yesterday, the strongest level since August 2012. The yen was little changed at 146.92 per euro.
The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, has risen 11 percent this year, set for the biggest annual gain in data starting in December 2004. It slipped 0.3 percent to 1,130.10 today.
The index’s 14-day relative-strength index reached 71 yesterday, above the 70 level some traders see as a signal an asset may have declined too far, too fast and is due to reverse course. It was at 67 today.
The greenback is headed for gains against all of its 16 major peers this year for the first time since 2000.
Declines range from the Singapore dollar’s 4.6 percent drop to the 18.5 percent plunge by the krone of Norway, as lower oil prices weighed on the economic outlook for Western Europe’s largest crude producer. The yen fell 12.6 percent and the euro lost 11.3 percent.
Taiwan’s dollar slid to a four-year low versus the greenback today as overseas investors sold $2 billion more Taiwan stocks than they bought this month, set for the biggest outflow since June last year.
The currency weakened 0.2 percent to NT$31.815 per U.S. dollar after reaching NT$31.894, the least since September 2010.
The ruble gained even after Standard & Poor’s said it’s considering cutting Russia’s credit rating to junk. Hours earlier, lawmakers pushed through legislation to allow the government to bail out struggling lenders.
The ruble rose 2 percent to 53.4400 per dollar after reaching 80.10 on Dec. 16, the weakest level on record.
Russia’s currency has still dropped 8.6 percent this month, the most against the dollar among 174 foreign-exchange values, followed by the Armenian dram’s 6 percent depreciation. The Malawian kwacha leads gainers with a 4 percent climb, while the Madagascar ariary added 3.5 percent.
Even as the euro gained today, it headed for a sixth month of losses against the dollar amid speculation the European Central Bank is moving toward boosting currency-depreciating stimulus to revive growth.
“The euro will weaken especially against the dollar as a result of additional easing,” said Masato Yanagiya, head of foreign exchange and money trading at Sumitomo Mitsui Banking Corp. in New York. “More and more people are expecting the ECB to start buying sovereign bonds.”
In contrast, the Federal Reserve is moving toward raising interest rates for the first time since 2006 as the U.S. economic recovery strengthens.
Jobless claims dropped by 9,000 to 280,000 in the week ended Dec. 20, the fewest since early November, from 289,000 in the prior period, a Labor Department report showed today in Washington. The median forecast of 47 economists surveyed by Bloomberg called for 290,000.
A report yesterday showed U.S. gross domestic product grew at a 5 percent annual rate from July through September, the biggest advance since the third quarter of 2003.
“The theme in the past few weeks has been dollar strength,” Nick Bennenbroek, head of currency strategy at Wells Fargo & Co., said in a phone interview from New York. The dollar weakened today as “investors are overlooking the data -- we’re seeing some small position-squaring ahead of the holiday.”