Dollar Posts Best Month in More Than a Year on Jobs

The dollar rose, extending its biggest monthly gain in more than a year, as unemployment claims fell to the lowest since 2006 before a jobs report forecast to show a sixth month of 200,000-plus gains.

The yen and Swiss franc advanced against most of their 16 major peers on haven demand after Argentina defaulted on its debt. That nation’s peso fell. The U.S. currency climbed versus all of its major counterparts in July as signs of a strengthening labor market boosted predictions for higher Federal Reserve interest rates. India’s rupee weakened on concern capital inflows to emerging markets will slow as the Fed cuts bond purchases.

“Data out of the U.S. has been pretty upbeat, nonfarm payroll tomorrow could potentially have a strong impact on the dollar as well,” Eric Viloria, a strategist at Wells Fargo & Co. in New York, said in a phone interview. Viloria recommends investors resist buying the dollar as “we won’t see the dollar to really strengthen until a rate hike from the Fed is more imminent.”

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major counterparts, rose a sixth day, adding 0.1 percent to 1,021.93 at 5 p.m. New York time. It climbed 1.9 percent in July, its biggest monthly gain since May 2013, to wipe out a 1.6 percent first-half loss,

The dollar rose 0.1 percent to $1.3390 per euro after appreciating to $1.3367 yesterday, the strongest since Nov. 12. Its 2.2 percent advance this month is the most since February 2013. The U.S. currency was little changed at 102.80 yen, while the euro was little changed at 137.65 yen.

Winners, Losers

Indonesia’s rupiah rose the most this month among the dollar’s 31 major peers, adding 2.6 percent as Joko Widodo was elected president. No other currency gained more than 0.5 percent.

Russia’s ruble declined the most, dropping 4.8 percent in July, amid turmoil in neighboring Ukraine and economic sanctions by the U.S. and European Union. The Hungarian forint and Chile’s peso slipped 3.4 percent.

Argentina’s peso weakened 3.9 percent to 12.8 per dollar in unregulated street trading today after the country missed a payment on $13 billion of its debt as banks sought a deal that would allow the country to resume servicing its securities.

The Swiss franc rose 0.1 percent to 1.2169 centimes per euro and was little changed at 90.88 centimes per dollar.

India’s currency fell the most in seven weeks on speculation the conclusion of the Fed’s bond purchases will curtail demand for emerging-market assets.

The rupee fell 0.8 percent to 60.56 per dollar, the biggest one-day decline since June 13.

Europe’s Inflation

The 18-nation shared currency dropped today as a report showed the euro-area inflation rate unexpectedly slowed to 0.4 percent in July compared with 0.5 percent in June. That’s the lowest reading since 2009. The median estimate in a survey of economists by Bloomberg News was for the rate to hold at 0.5 percent this month.

A separate report showed the euro-area unemployment rate unexpectedly dropped to 11.5 percent in June from 11.6 percent in May.

The European Central Bank is trying to stop inflation falling too low in an economy struggling to recover from a debt crisis that threatened to fragment the euro bloc. Inflation has been below 1 percent every month since October.

Job Growth

The dollar climbed as official data today showed the four-week average of jobless claims, considered a less volatile measure than the weekly figure, dropped to 297,250, the lowest since April 2006, from 300,750 the prior week, the Labor Department reported.

U.S. employers added 231,000 workers in July and the jobless rate stayed at an almost six-year low of 6.1 percent, according to Bloomberg News surveys before tomorrow’s Labor Department data. The world’s biggest economy expanded at a 4 percent annualized pace last quarter, after shrinking 2.1 percent in the previous three months, the Commerce Department said yesterday.

“The dollar is at the beginning of an uptrend versus the euro and the yen,” said Alvin Tan, a foreign-exchange strategist at Societe Generale SA in London. “The market is getting increasingly hawkish about U.S. rates. Short-term forward expectations of Fed policy have been moving forward quite steadily.”

Fed’s Mandate

Societe Generale today recommended buying the dollar versus the yen at a spot rate of 102.60, with a target of 105.00. The bank would exit the recommendation on a daily close below 101.70.

The dollar will strengthen to 105 yen by year-end, according to the median forecast of more than 60 analysts surveyed by Bloomberg.

Fed officials cut monthly bond buying to $25 billion at a two-day meeting that finished yesterday, staying on pace to end the program in October.

Traders see 80 percent odds the central bank will raise the target for its benchmark rate to at least 0.5 percent by September 2015, based on futures contracts. The figure was 76 percent on June 30.

“The dollar is at new highs -- this is the move people have been waiting for,” said Marc Chandler, the chief currency strategist at Brown Brothers Harriman & Co. in New York. “We have stronger U.S. data, and the Fed getting closer to its mandate.”

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