Dollar Soars to 5-Year High as Jobs Gains Accelerate; Yen Slumps

A dollar gauge soared to the highest in five years as U.S. employers added the most jobs in almost two years, backing the case for the Federal Reserve to lead global central banks in raising interest rates.

The greenback climbed to multi-year highs against the yen, euro and Canadian dollar as American companies added 321,000 jobs, topping all forecasts in a Bloomberg survey, Labor Department figures showed in Washington. Japan’s currency slumped as an aide to Prime Minister Shinzo Abe said the decline is benefiting the economy. Norway’s krone and Malaysia’s ringgit slid to five-year lows as a slump in crude oil damped the economic outlook for the nations.

“A lot of pairs are trading at levels that we haven’t seen in many years,” Lennon Sweeting, a San Francisco-based dealer at the broker and payment provider USForex Inc., said in a telephone interview. “This number should put a little bit more pressure on the Fed to look at raising rates in 2015, hopefully in the first half of the year,” he said, adding “that would keep the dollar rolling in a very positive way.”

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 trading partners, gained 0.9 percent to 1,122.34 at 5 p.m. in New York, its highest close since March 2009. It rose 1.4 percent this week, a seventh straight weekly advance and the biggest five-day gain since the period ended Nov. 1, 2013.

The greenback rose 0.8 percent to $1.2283 per euro and reached $1.2271, the strongest level since August 2012. The U.S. currency climbed 1.4 percent to 121.46 yen after touching 121.69, the most since July 2007. Japan’s currency fell to a six-year low of 149.52 versus the euro, before trading 0.7 percent lower at 149.23.

Dollar Bets

Hedge funds and other large speculators increased wagers on the dollar’s strength versus eight of its major peers to a record this week. The difference in the number of positions on gains versus those on declines -- net longs -- was 428,558 as of Dec. 2, according to data released today by the Washington-based Commodity Futures Trading Commission. It was 418,825 a week earlier.

The dollar climbed for a seventh week against the yen, with its 2.4 percent jump the most since Oct. 31. Its 1.4 percent advance versus the euro was the most since September. The shared currency advanced for an eighth straight week against the yen, the longest streak since February 2013.

Ruble, Rupee

The ruble was the biggest decliner among the greenback’s 31 major peers this week, tumbling 6.5 percent to push its slump this year to 38 percent. The only weekly gainers were the Indian rupee, adding 0.4 percent, and Hong Kong’s dollar, up less than 0.1 percent.

The Canadian dollar touched a five-year low today as data showed the economy lost 10,700 jobs in November, adding to speculation the Fed will raise interest rates before the Bank of Canada. The loonie depreciated 0.5 percent to C$1.1435 per U.S. dollar and touched C$1.1476, the weakest since July 2009.

Norway’s krone declined to a five-year low as oil tumbled, pushing Brent crude’s slump to 17 percent in the past month as the Organization of Petroleum Exporting Countries decided not to cut output to shore up prices. Norway is Western Europe’s largest petroleum producer.

The krone tumbled 1.4 percent to 7.1567 per dollar, touching 7.1824, the weakest level since March 2009.

Malaysia’s ringgit dropped as exports contracted for the first time in 16 months in October, official data showed. The currency weakened 0.7 percent to 3.4713 per dollar, after reaching 3.4757, a level last seen in October 2009.

135 Yen?

The yen, which fell versus all but three of its 31 major peers, will depreciate as far as 125 per dollar within a few weeks as the Bank of Japan maintains its unprecedented stimulus to revive growth, according to Mitsubishi UFJ Asset Management Co. Japan’s currency has tumbled 20 percent since June 30.

The currency’s decline, while faster than expected, is a plus for the Japanese economy, said Etsuro Honda, an adviser to Abe. The yen won’t fall below 130 to 135 per dollar, he told reporters in Tokyo. It last reached 135 in 2002.

“It looks as if the trend is in with the dollar strengthening against the other developed currencies,” said Quincy Krosby, a market strategist based in Newark, New Jersey, at Prudential Financial Inc., which oversees $1 trillion in assets as of Sept. 30. “The economy is clearly moving from slow to solid and -- if we continue this way -- we’ll get to stellar probably within a year.”

‘Very Positive’

The dollar rallied versus 23 of its 31 major peers after the advance in U.S. payrolls exceeded the most optimistic projection in a Bloomberg survey of more than 80 economists, the median of which was 230,000. The unemployment rate held at a six-year low of 5.8 percent, while average hourly earnings rose 0.4 percent, the biggest increase since June of last year.

“All of this is very positive for the dollar,” Omer Esiner, chief market analyst at the currency brokerage Commonwealth Foreign Exchange Inc. in Washington, said by phone. “This is likely to not only keep the Fed on track to raise rates around the middle of next year, but could begin to spark talk of a potentially earlier interest-rate hike by the Fed.”

The Fed is evaluating the state of the labor market as it looks to tighten interest rates for the first time since 2006. It meets Dec. 16-17.

The dollar has surged 7.9 percent in the past three months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro rose 1.7 percent, while the yen slumped 8.1 percent, the biggest decline.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE