Dollar Gains Versus Yen, Euro as Fed Odds Weighed Before Yellen

  • Fed chair to give semiannual testimony to Congress this week
  • Yen weakens against Australian dollar as stocks pare losses

Fed Rate Hikes to Be Forced by Higher Wages: Amoroso

The dollar rose for a second day against the euro and yen as investors looked toward Federal Reserve Chair Janet Yellen’s testimony to Congress Wednesday for signs of whether markets are underestimating the odds of a near-term interest-rate increase.

The greenback climbed after a U.S. employment report on Friday showed wage growth exceeded estimates, bolstering the case for the Fed to lift rates this year. Futures pricing for a move before year-end climbed to 53 percent Friday from 46 percent the previous day. The yen weakened versus Australia’s dollar as equities in Japan erased declines and the nation reported a current-account surplus that was smaller than economists had forecast.

“Markets are looking to Yellen’s testimony this week to see whether she will still leave an option open for a March rate increase or sound dovish,” said Ayako Sera, a Tokyo-based market strategist at Sumitomo Mitsui Trust Bank Ltd. “The dollar can easily swing one yen up and down from 117, but, after the payrolls data, 117 seems to have become a magnet.”

The dollar rose 0.5 percent to 117.50 yen as of 6:47 a.m. in London, following a 3.5 percent slide last week that was the most since 2009. It advanced 0.2 percent to $1.1139 per euro, after rallying Friday from a three-month low. The yen slid 0.4 percent to 130.87 per euro and tumbled 0.8 percent to 83.30 per Aussie dollar.

Markets closed Monday for the Lunar New Year holidays include those in China, Hong Kong, Indonesia, Singapore and South Korea.

Payrolls, Wages

U.S. employers added 151,000 to payrolls in January and the unemployment rate dropped to an almost eight-year low of 4.9 percent, a report showed last week. Hourly earnings rose more than estimated after climbing in the year to December by the most since July 2009.

“Stronger than expected U.S. wage growth has called into question last week’s accepted wisdom that the U.S. dollar would fall as moderating economic growth pressured the Fed to delay its rate hike program,” Ric Spooner, a chief analyst at CMC Markets in Sydney, wrote in an e-mailed report.

The Bloomberg Dollar Spot Index rose 0.1 percent to 1,229.37 after climbing 0.6 percent on Friday, its biggest advance this year. It was still down 0.3 percent since Dec. 31. Japan’s Topix index of shares reversed a decline of as much as 1.7 percent to close 0.8 percent higher.

Japan posted an 18th consecutive current-account surplus in December. The excess in the widest measure of the nation’s trade was 960.7 billion yen ($8.2 billion), from 225.9 billion yen a year earlier, the Finance Ministry said Monday. The median estimate in a Bloomberg survey was for a surplus of 1.05 trillion yen.

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