Dollar Rises to Strongest Since 2009 Versus Yen Before PayrollsDavid Goodman
The dollar rose to the strongest since August 2009 against the yen before a U.S. report that analysts said will show employers stepped up hiring last month, adding to signs the world’s biggest economy is gaining momentum.
The Dollar Index approached the highest since August on speculation an improving labor market will convince the Federal Reserve to end its program of asset purchases known as quantitative easing. The yen dropped at least 0.6 percent against all its 16 major counterparts as a government report showed Japan’s current-account deficit widened in January. Sweden’s krona fell from a six-month high against the euro after industrial production declined.
“There’s been a market realization that the real economy in the U.S. is in a growth phase,” said Peter Frank, global head of currency strategy at Banco Bilbao Vizcaya Argentaria SA in London. “That’s a really strong reason to be bullish on the dollar. By the end of this year, the Fed will start to give details of how it’s going to withdraw its accommodative policy. There’s nothing positive for the yen right now.”
The dollar advanced 1 percent to 95.74 yen at 7:15 a.m. in New York after climbing to 95.80, the highest level since Aug. 13, 2009. The U.S. currency was little changed at $1.3108 per euro after sliding 1.1 percent yesterday, the biggest decline since Jan. 10. The yen fell 1 percent to 125.52 per euro.
U.S. employers added 165,000 jobs last month, up from 157,000 in January, according to a Bloomberg News survey before the Labor Department report at 8:30 a.m. in Washington. The jobless rate held at 7.9 percent, a separate survey showed.
“The greater the momentum in the U.S. economy, the sooner the Fed will taper off QE,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “Dollar-yen is a preferred tool for dollar bulls at the moment.”
After strengthening through 95 yen this week, the dollar may climb to 100 yen by year-end, Banco Bilbao’s Frank said. Implied volatility from options trading shows the probability of the greenback reaching that level by Dec. 31 is 66 percent.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, gained 0.1 percent to 82.19 after rising to 82.604 on March 6, the highest level since Aug. 20.
The yen extended a second weekly loss against the dollar as the Ministry of Finance said the deficit in the current account, the widest measure of trade, increased to 364.8 billion yen in January, up from 264.1 billion yen a month ago.
Japan’s currency has slumped 9.4 percent versus the dollar this year as Prime Minister Shinzo Abe pushed the central bank to add to stimulus to beat deflation. Haruhiko Kuroda, Abe’s pick to become the next Bank of Japan governor, told lawmakers this week the scale of the BOJ’s asset purchases was insufficient to achieve its target of 2 percent inflation.
The yen has tumbled 8 percent in 2013, the biggest drop among 10 developed-nation currencies tracked by Bloomberg Correlation Weighted Indexes. The dollar gained 2.7 percent and the euro climbed 1.9 percent.
The euro headed for a weekly advance versus the dollar, snapping four weeks of declines, after European Central Bank President Mario Draghi said yesterday the region will gradually recover later this year.
“With the euro risk receding and expectations for U.S. economic growth improving, the yen may come under selling pressure in a risk-on trade” said Junichi Ishikawa, an analyst at IG Markets Securities Ltd. in Tokyo.
The krona dropped against all except one of its major peers after Statistics Sweden said industrial production declined an annual 7.8 percent in January after falling 2.2 percent the previous month. Production was estimated to decline 4.8 percent, according to a Bloomberg survey.
Sweden’s currency weakened 0.4 percent to 8.3288 per euro after earlier advancing to 8.2832, the strongest since Aug. 28. The krona dropped 0.4 percent to 6.3552 per dollar.
South Africa’s rand rose for the first time in three days after Reserve Bank Governor Gill Marcus said the currency’s decline to beyond 9 per dollar was excessive.
The rand “will, over a period of time, retrace back to a more reasonable level,” Marcus said in an interview with Manus Cranny on Bloomberg Television.
The currency gained 0.4 percent to 9.1044 per dollar after falling to 9.1884 yesterday, the weakest since April 2009.