Dollar Posts Weekly Gains as U.S. Data Support Pace of Fed Taper

The dollar posted weekly gains against the euro and the yen as improvements in economic data strengthened the case for the Federal Reserve to remove stimulus this year.

The pound was near a four-year high before the Bank of England releases minutes on April 23 of this month’s meeting. The New Zealand dollar recorded its biggest weekly decline since January before the nation’s central bank meets next week. The won posted its first five-day drop in a month. Currency volatility sank to an almost seven-year low.

“The jobless claims and Philadelphia Fed reports were both good, and the dollar was bid on the back of that,” said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “If U.S. jobs numbers stay positive, the Fed will probably continue to taper at the current pace.”

The dollar climbed 0.5 percent this week to $1.3813 per euro in New York, the biggest gain since the five days ended March 21. It strengthened 0.8 percent to 102.43 yen, also the largest gain in four weeks, and touched 102.57 yesterday, the strongest level since April 8. The euro appreciated 0.2 percent this week to 141.45 yen.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, rose 0.4 percent to 1,010.90 since April 11.

U.S. Economy

The Philadelphia Fed’s factory index increased to 16.6 in April, the highest since September, data showed April 17. Initial jobless claims rose by 2,000 to 304,000 in the week ended April 12 from a revised 302,000 the prior period that was the lowest since September 2007, a Labor Department report showed on the same day.

The index of U.S. leading indicators probably rose 0.7 percent in March, the most since November, according to the median estimate of economists in a Bloomberg News poll before the data are released on April 21.

The Fed began tapering its monthly asset purchases in January, and economists predict the asset-purchase program will end in October.

South Korea’s won posted its first weekly drop in a month on speculation global funds repatriated stock dividends and as improving U.S. economic data bolstered demand for dollars.

The won declined 0.2 percent since April 11 to 1,037.58 per dollar at the close in Seoul, according to data compiled by Bloomberg. It’s Asia’s best-performing currency over the past six months having appreciated 2.2 percent. It reached 1,031.55 on April 10, the strongest since August 2008.

“The dollar rebounded as U.S. data turned positive and as foreigners converting dividend proceeds supported demand for the greenback,” said Son Eung Jeong, a Seoul-based currency analyst at Woori Futures Co. “There seems to be many market investors thinking 1,030 will be the peak for the won for some time.”

Volatility Drops

Financial markets in the U.S., U.K., Germany, Hong Kong, Singapore, Australia and New Zealand are among those that were closed for a holiday yesterday.

Deutsche Bank AG’s Currency Volatility Index, based on three-month implied volatility on nine major currency pairs, slid for a third week to 6.52 percent, the lowest close since July 2007.

The BOE will release the minutes of its April 10 meeting, at which it left interest rates at a record-low 0.5 percent. Sterling’s five-day gain was 0.4 percent to $1.6794, after touching $1.6842, the highest since November 2009, on April 17.

All 15 economists in a Bloomberg survey expect the Reserve Bank of New Zealand to raise its official cash rate by 25 basis points to 3 percent at the April 24 meeting. The central bank raised borrowing costs by a quarter percentage point last month. The kiwi dropped 1.2 percent this week to 85.82 U.S. cents, the biggest five-day decline since the period ended Jan. 31.

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