BS: Euro Gains Versus Yen on Crisis Optimism, U.S. Jobless-Rate Drop
Dec. 2 (Bloomberg) -- The euro rose against the yen as U.S. unemployment dropped in November and on optimism the International Monetary Fund will channel European Central Bank loans to the region’s debt-strapped nations.
The 17-nation currency erased gains versus the dollar after growth in U.S. payrolls fell short of economists’ forecasts. The greenback headed for its first weekly loss versus the euro since October as stocks rose. A plan to funnel ECB loans through the IMF may deliver up to 200 billion euros ($271 billion) to fight the debt crisis, two people familiar with the negotiations said.
“The fact that we had an outcome that wasn’t exceptionally better than thought has brought in a little bit of profit taking,” said Ray Attrill, a senior currency strategist at BNP Paribas SA in New York, referring to the employment report. “We had a decent run-up, the euro had gone up, so there was a little bit of ‘buy the rumor, sell the fact.’”
The euro gained 0.1 percent to 104.74 yen at 10:43 a.m. New York time. It declined 0.2 percent to $1.3438, after rising earlier as much as 0.7 percent. The shared currency has advanced 1.5 percent this week versus the dollar. The yen weakened 0.3 percent to 77.95 per dollar.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trade partners including the euro and yen, rose 0.2 percent to 78.442 after falling earlier as much as 0.4 percent. It reached a seven-week high of 79.702 on Nov. 25.
Jobless Rate
The U.S. unemployment rate declined to 8.6 percent, the lowest since March 2009, from 9 percent in October, Labor Department figures showed today in Washington.
Payrolls climbed by 120,000, compared with a forecast of a 125,000 gain in a Bloomberg News survey. More than half the hiring came from retailers and temporary-help agencies. There was a revised 100,000-job increase in October that was more than initially estimated.
Euro-area finance ministers gave the go-ahead for work on the IMF plan at a Nov. 29 meeting attended by ECB President Mario Draghi, said the two people, who declined to be named because talks are at an early stage. The need for a new crisis- containment tool emerged as the effort to boost the region’s 440 billion-euro rescue fund to 1 trillion euros fell short.
‘More Meaningful Step’
“This goes to the heart of the day-to-day financing of these nations,” said Boris Schlossberg, director of research at the online currency trader GFT Forex in New York. “It’s a much more meaningful step than a lot of the monetary intervention that they had been doing.”
Spanish 10-year government bonds rose for a fifth day, sending yields down more than 100 basis points in the week, the most since the euro-region was created in 1999, to 5.55 percent. A basis point is 0.01 percentage point. Italian 10-year bond yields dropped to 6.57 percent, trading below 7 percent for the first time in a week.
The yen dropped versus most of its major peers as Japanese Finance Minister Jun Azumi said he’ll take action on speculative currency moves.
The yen climbed to a postwar record of 75.35 per dollar on Oct. 31, prompting Japan to intervene in markets for the third time this year to stem gains that endangered an export-led economic recovery. The nation sold 9.09 trillion yen from Oct. 28 to Nov. 28, the Ministry of Finance said this week, the most on a monthly basis in data going back to 1991.
U.S. Momentum
The U.S. economic recovery may be gaining momentum, data earlier this week signaled. American manufacturing expanded in November at the fastest pace in five months, an Institute for Supply Management index showed yesterday. The Conference Board’s index of consumer confidence increased to a reading of 56 last month from 40.9 in October, the biggest jump since April 2003, a report from the private research group showed on Nov. 29.
“With the strong consumer confidence and the decent ISM yesterday, the expectations for today’s payrolls were amplified,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “It’s broadly in line with expectations, but it’s not as good as widely hoped for, hence the minor reaction so far in risk.”
Canada’s dollar slipped 0.1 percent to C$1.0153. It fluctuated earlier after data showed the nation’s employers unexpectedly eliminated 18,600 jobs last month as U.S. payrolls increased. The U.S. is Canada’s biggest trading partner.
South Africa’s rand was the biggest winner among the dollar’s 16 most-traded counterparts. It appreciated 1 percent to 8.0042, bringing its weekly gain to 6.7 percent, the most since October 2008.
--With assistance from Keith Jenkins in London. Editors: Greg Storey, Kenneth Pringle
To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Allison Bennett in New York at abennett23@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
