Dollar Falls as Jobs Gains Trail Forecast; Emerging Markets Rise

The dollar fell versus most emerging-market currencies as employment gains that failed to meet traders’ more optimistic expectations boosted speculation the Federal Reserve would remain accommodative.

The U.S. currency dropped for the first time in seven days against the yen as nonfarm payrolls rose 192,000 in March, versus a forecast of 200,000. Brazil’s real led the developing-economy rally as its central bank planned auctions to extend maturities on swap contracts that support the currency. Canada’s dollar rose to a four-week high on jobs gains. Fed Chair Janet Yellen said in a speech this week the world’s biggest economy may need central-bank stimulus for “some time.”

“The number disappointed NFP bulls, but it was strong enough so that there was no sign of any unexpected weakening of the economy and not so strong as to worry investors that the Fed would accelerate its withdrawal of liquidity,” said Richard Cochinos, the head of Americas Group of 10 currency strategy at Citigroup Inc. in New York. “Higher-beta G-10 currencies and emerging markets are the biggest winners.” Higher-beta currencies tend to have the greatest volatility.

The dollar fell 0.6 percent to 103.29 yen at 5 p.m. in New York, trimming a third weekly gain to 0.5 percent. The greenback rose 0.1 percent to $1.3705 per euro after climbing to $1.3673, the strongest since Feb. 27. It gained 0.3 percent for a third weekly increase, in the longest rally since July. The euro weakened 0.7 percent to 141.54 yen.

The Bloomberg U.S. Dollar Index slid 0.3 percent to 1,016.65, the biggest daily decline since March 6.

Yen Shorts

Futures traders increased their bets that the yen will decline against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission show.

The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen compared with those on a gain -- net shorts -- was 88,638 on April 1, compared with 68,887 a week earlier.

Brazil’s real led the advance among 24 emerging-market currencies as its central bank was planned as auction today to extend maturities of 10,000 foreign-exchange swap contracts originally due May 2 and worth $8.73 billion.

“The market was questioning whether the central bank would resume such auctions or not,” Juliano Ferreira, an analyst at ICAP do Brasil Ctvm in Sao Paulo, said in a telephone interview. “The central bank is signaling it will keep giving support to the currency this month.”

The real rose 1.9 percent to 2.2358 per dollar, turning a weekly loss into a 1.1 percent gain.

Russsia’s ruble, Mexico’s peso and the Turkish lira all advanced 0.9 percent. A custom Bloomberg index with equal weightings of the dollar’s 20 most-traded emerging-market peers rose 0.4 percent, the most on a closing basis since March 6.

Canadian Jobs

Canada’s dollar rose to a four-week high as employment increased by 42,900, the most in seven months, and the jobless rate fell to 6.9 percent from 7.0 percent, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg News projected a 22,500 job increase and a jobless rate unchanged at 7 percent. Central bank Governor Stephen Poloz said March 18 a rate cut might be possible if the economy worsens.

“It was a strong number with strong details, and that’s positive for Canada,” said Camilla Sutton, head of currency strategy at Bank of Nova Scotia, by phone from Toronto. “What we have left is where that leaves Governor Poloz. Should he sound as dovish as he did the other week on April 16, that will resurge the weakness story. Should he sound quite neutral, that will bring further gains for the Canadian dollar.”

The loonie, nicknamed for the image of the aquatic bird on the C$1 coin, gained 0.5 percent to C$1.0981 per U.S. dollar. It touched C$1.0957, the strongest since March 6.

Fed Policies

Yellen highlighted the job market in her speech this week, saying that the recovery “still feels like a recession to many Americans.”

The payrolls gain last month followed a 197,000 climb in February that was larger than first estimated, the Labor Department reported in Washington. Forecasts in a Bloomberg survey ranged from increases of 150,000 to 275,000. Private employment, which excludes government jobs, surpassed the pre-recession peak for the first time. The jobless rate held at 6.7 percent.

‘Whisper Numbers’

“Some of the whisper numbers, I heard even 300,000, so that’s offering some mild disappointment,” said Joe Manimbo, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co. “This is one of those reports that has an acquired taste, maybe the market needs some time to chew it over. But I think there’s more to it that meets the eye.”

Traders brought forward bets on when the Fed will raise borrowing costs after Yellen signaled last month the central bank may end the bond-purchase program it uses to support the economy in the second half of 2014, and increase rates six months after that. It has trimmed monthly buying to $55 billion from $85 billion last year.

The jobs report “confirms the path the Fed is on, it confirms everything that Yellen has said,” Brad Bechtel, managing director at Faros Trading LLC in Stamford, Connecticut, said in a phone interview.

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