BLBG: Dollar Rises Against Euro as Job Losses Increase
By Ye Xie and Michael J. Moore
Dec. 5 (Bloomberg) -- The dollar rose against the euro for the first time in four days as the U.S. payrolls report showed the biggest job losses in 34 years, increasing the haven appeal of the greenback.
Japan’s yen posted its fifth weekly gain versus the dollar, its longest rally since December 2004, as speculation rose that the Federal Reserve will cut borrowing costs to near zero this month. Russia’s ruble tumbled as crude oil fell to the lowest since December 2004. Brazil’s real rose from a three-year low after the central bank bought the currency to stem a rout.
“It’s a historic decline in employment,” said Robert Blake, a senior currency strategist in Boston at State Street Global Markets LLC, which has $15.3 trillion in assets under custody. “We have seen investors continue buying dollars and selling euros.”
The dollar rose 0.3 percent to $1.2738 per euro at 4:19 p.m. in New York, from $1.2777 yesterday. The euro gained 0.4 percent to 118.33 yen from 117.85. The dollar increased 0.7 percent to 92.87 yen from 92.23.
Japan’s currency erased its gains versus the euro and the dollar today as U.S. stocks rallied after Hartford Financial Services Group Inc. increased its profit forecast. The Standard & Poor’s 500 Index gained 3.7 percent.
The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, the Swiss franc and Sweden’s krona, climbed 0.8 percent to 87.121. It touched 88.463 on Nov. 21, the highest since April 2006.
Repatriated Funds
The dollar strengthened as investors sold higher-yielding assets and repatriated funds. Three-month U.S. Treasury bill rates were at 0.01 percent for a third day.
“You have a tug of war between gloomy U.S. economic fundamentals and the flight to safety to the dollar,” said Stephen Malyon, co-head of currency strategy at Scotia Capital Inc. in Toronto. “The dollar still enjoys some support against most other currencies.”
Futures contracts on the Chicago Board of Trade showed 76 percent odds the Fed will lower its 1 percent target lending rate to 0.25 percent by its next meeting on Dec. 16, compared with a 64 percent chance yesterday.
Canada’s currency slid as much as 1.9 percent to C$1.3007 per U.S. dollar, the weakest since Oct. 28, after the national statistics bureau reported the economy lost 70,600 jobs last month, almost triple the median forecast of 21 economists in a Bloomberg News survey.
Weaker Loonie
The loonie was headed for a 3.1 percent drop this week as crude oil for January delivery headed for its biggest weekly drop since 1991 and Prime Minister Stephen Harper suspended Parliament to save his minority government. Commodities generate a third of Canada’s export revenue.
Russia’s ruble slid as much as 1.7 percent to 28.2766 per dollar today, the weakest level since February 2006. The central bank widened the currency’s trading band for a fourth time in a month as the price of Urals crude oil, the country’s main export, fell below $40 a barrel.
The real rose 2.9 percent after the Brazilian central bank bought reais and sold currency-swap contracts after earlier dropping as much as 4.5 percent to 2.6202 per dollar, the weakest level since April 2005.
U.S. payrolls dropped by 533,000 last month, bringing losses this year to 1.91 million, the Labor Department said today in Washington. The median forecast of 73 economists surveyed by Bloomberg News was for a reduction of 335,000. The unemployment rate rose to 6.7 percent.
Yen’s Gains
Japan’s currency recorded a 2.9 percent increase against the euro and a 2.7 percent gain versus the dollar this week. The yen has risen 21 percent against the greenback and 39 percent versus the euro this year.
The euro fell versus the dollar as Germany’s Economy Ministry reported that manufacturing orders slumped in October more than forecast, dropping 6.1 percent after being adjusted for seasonal swings and inflation. It’s the 10th decline in orders in the past 11 months.
The European Central Bank delivered the biggest interest- rate cut yesterday in its 10-year history after the economic slump deepened and the inflation rate plunged. ECB policy makers lowered the main refinancing rate by 0.75 percentage point to 2.5 percent.
To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Michael J. Moore in New York at mmoore55@bloomberg.net
