BLBG:Dollar Gains 2nd Day Versus Yen Before ADP Jobs Data
The dollar gained for a second day against the yen before a report that economists said will show U.S. companies added workers in April, easing speculation the Federal Reserve will add to stimulus.
The greenback was higher against the euro after three voting members of the Federal Open Market Committee said they don’t see a need to ease policy further as the economy maintains its expansion. The yen extended losses after Moody’s Investors Service said the role of lawmaker Ichiro Ozawa in Japan’s tax reform talks could have credit implications for the nation. The yuan rose before U.S. Treasury Secretary Timothy F. Geithner meets Chinese officials tomorrow in Beijing.
“The combination of the commentary from Fed governors and the stronger-than-expected data asks the question, ‘Should we be putting more weight on the recovery in the U.S. economy?’” Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp. (WBC), Australia’s second-largest lender. “That is something that clearly should be supporting the U.S. dollar.”
The dollar advanced 0.5 percent to 80.48 yen at 8:25 a.m. London time. It rallied 0.3 percent yesterday after touching 79.64, the weakest since Feb. 21. The U.S. currency gained 0.1 percent to $1.3227 per euro. The yen dropped 0.4 percent to 106.46 per euro.
U.S. companies probably added 170,000 workers in April after a 209,000 gain in the previous month, according to the median estimate of economists in a Bloomberg News survey before ADP Employer Services releases its workforce figures today.
ISM Data
Data yesterday from the Institute for Supply Management showed its index of U.S. manufacturing rose to 54.8 in April, the most since June, from 53.4 in March. Economists had forecast 53, and readings greater than 50 signal growth.
Fed Bank of Richmond President Jeffrey Lacker said yesterday in Washington that more monetary stimulus risks stoking inflation while doing little to strengthen the recovery. The San Francisco Fed’s John Williams said the outlook he expects doesn’t warrant more bond buying, and Atlanta’s Dennis Lockhart repeated that he’s skeptical of the benefits of such action. Lacker is scheduled to speak on the economic outlook in Norfolk, Virginia today.
The Fed left policy unchanged after its April 24-25 meeting, and Chairman Ben S. Bernanke signaled that further stimulus is unlikely unless the economy unexpectedly deteriorates. The U.S. central bank bought $2.3 trillion of bonds in two rounds of so-called quantitative easing from December 2008 to June 2011 to stimulate the economy.
Ozawa Effect
The yen extended declines against the dollar and euro after Tom Byrne, senior vice president at Moody’s, commented on the possible effect Ozawa could have on Japan’s tax negotiations.
An increase in the country’s consumption tax “is a significant issue that hasn’t been resolved yet,” Byrne told reporters in Manila today. “Ozawa’s role in the debate, there could be implications there, but right now we don’t see anything.”
Ozawa, a ruling party powerbroker who was found not guilty last month of violating campaign finance laws, has opposed a plan by Prime Minister Yoshihiko Noda to double Japan’s sales tax to 10 percent by 2015.
“Moody’s comments may have brought downgrade risk to investors’ mind,” said Yuji Saito, director of the foreign- exchange department in Tokyo at Credit Agricole SA. (ACA) “That accelerated selling in the yen.”
ECB Meeting
Demand for the 17-nation euro was limited before data today that may show the region’s manufacturing weakened last month and before the European Central Bank meets on policy tomorrow.
Economists predicted that Markit Economics would confirm its gauge of euro-area manufacturing dropped to 46 in April, an almost three-year low. The March reading was 47.7.
The ECB will keep the bank’s benchmark interest rate at a record-low 1 percent at tomorrow’s meeting in Barcelona, according to all economists surveyed by Bloomberg.
ECB President Mario Draghi may “begin to hint that the outlook for the European economy is clearly beginning to deteriorate again,” said Westpac’s Rennie. “Within the next couple of months, the possibility of further rate cuts from the ECB is rising.”
Spain will auction three- and five-year notes tomorrow amid speculation that the euro area’s fourth-largest economy will follow Greece, Ireland and Portugal in seeking a bailout. France and Greece hold elections on May 6.
Euro Worst Performer
The euro has weakened 6.3 percent over the past 12 months, the worst performance of the 10 developed-nation currencies tracked by Bloomberg Correlation Weighted Indexes. The dollar climbed 6.1 percent, and the yen rose 5.2 percent over the same period.
The yuan today climbed by the most in two weeks before meetings between U.S. and Chinese officials in Beijing that will probably include discussion of whether the currency is undervalued.
The fourth round of the U.S.-China strategic and economic talks involves Geithner and officials led by Chinese Vice Premier Wang Qishan. The People’s Bank of China raised the yuan’s fixing 0.19 percent to 6.2670 per dollar today, the strongest level since a peg ended in July 2005 and 0.7 percent higher than last week’s closing price.
“That’s definitely a friendly fixing for tomorrow’s meeting, and it’s quite a natural move for China,” said Tommy Ong, the Hong Kong-based senior vice president of treasury and markets at DBS (Hong Kong). “Officials want to show their willingness to allow market forces to play a bigger role in the yuan’s exchange rate.”
The yuan advanced 0.1 percent, the most since April 17, to 6.3025 per dollar, according to the China Foreign Exchange Trade System.
To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
