The dollar advanced to a two-week high against the yen on speculation the Federal Reserve may consider ending its $600 billion program of government debt purchases earlier than planned. The Swiss franc dropped against most of its major counterparts as evidence the global economic recovery is strengthening sapped demand for a refuge. Australia’s currency rose to a record versus the greenback on bets demand for the nation’s commodities will rise. The dollar gained after St. Louis Fed President James Bullard said yesterday the central bank may “reverse” current policy. “The rally in dollar-yen has to do with the market starting to take the hint that policy in the U.S. might be tightened earlier than we thought,” said Adam Cole, global head of foreign-exchange strategy at Royal Bank of Canada in London. “Risky assets generally are performing, and safe-haven assets are underperforming.” The yen depreciated 0.8 percent to 83.12 against the dollar at 7:18 a.m. in New York, from 82.48 yesterday. It earlier slid to 83.18, the weakest level since March 11, when Japan was struck by its biggest earthquake on record. The Swiss franc declined 0.2 percent to 92.21 centimes versus the dollar, from 92.01. The dollar advanced 0.2 percent to $1.4091 versus the euro, from $1.4113. Japan’s currency has weakened 2.4 percent against the dollar in the first quarter and 7.2 percent against the euro. The yen will depreciate to 85 against the dollar by the middle of this year and to 88 by year-end, according to the weighted average forecasts of analysts in a Bloomberg News survey. Gain in Stocks The Stoxx Europe 600 Index rose 0.8 percent, and the MSCI Asia Pacific Index of regional shares advanced 1.3 percent. Futures on the Standard & Poor’s 500 Index climbed 0.6 percent. U.S. companies added 208,000 workers in March after an increase of 217,000 in the previous month, according to the median forecast of 34 economists in a Bloomberg News survey before the report from ADP Employer Services at 8:15 a.m. New York time. The jobless rate held at 8.9 percent this month, economists forecasts before the Labor Department reports the figure on April 1. Unemployment fell below 9 percent in February for the first time in 22 months. The U.S. central bank may need to trim about $100 billion from its plan to buy $600 billion in Treasury securities through June 30, according to Bullard. Bullard’s View “If the economy is as strong as I think and hope it will be in 2011, I think it will be time for us to start to reverse our ultra-aggressive and ultra-easy monetary policy,” Bullard told reporters in Prague yesterday. Bullard and Kansas City Fed President Thomas Hoenig are scheduled to speak in London today, while Richmond Fed President Jeffrey Lacker is due to give congressional testimony. The euro slipped against the dollar as the European Central Bank Executive Board member Lorenzo Bini Smaghi said the risk of the region’s sovereign-debt crisis spreading to other European Union or euro-area nations is “not insignificant.” Speculation that Portugal may follow Greece and Ireland in accepting financial aid intensified yesterday after S&P cut Portugal’s credit rating to BBB-, saying the nation’s “considerable external financing needs” mean a financial rescue is likely. “For the euro to fall more significantly, we would need the strains in the euro zone to fall on another country,” said Steven Barrow, the head of G-10 currency research at Standard Bank Plc in London. Euro Versus Dollar Europe’s common currency has strengthened 5.4 percent versus the dollar this year as euro-region policy makers stiffened their anti-inflation views. The ECB will increase its main refinancing rate by a quarter-percentage point to 1.25 percent at its April 7 meeting, according to the median forecast of 31 economists in a Bloomberg News survey. “The euro has held up pretty well,” said Simon Smith, chief economist at FXPro Financial Services Ltd. in London. “The expectation for the euro is that the ECB will put up interest rates next month so it’s proving to be relatively immune to the weaker data and the situation in the periphery.” The Australian dollar rose 0.2 percent to $1.0316 from $1.0291 yesterday after touching $1.0333, the highest level since exchange controls ended in 1983. “You’ve got the risk of global economic growth left, right and center toward the end of this year, and Aussie is bid on that,” said Kurt Magnus, executive director of currency sales in Sydney at Nomura Holdings Inc., Japan’s biggest brokerage. China’s Purchasing Managers’ Index rose to 54 in March from 52.2 in the prior month, an April 1 report will show, according to a survey of economists. Commodities make up more than half of Australia’s exports, and China is the South Pacific nation’s largest trading partner. To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

Source