BS: Dollar Gains Versus Yen as U.S. Payrolls Increase Beats Forecast
The dollar rose against the yen after U.S. employers added more jobs in July than forecast, damping expectations the Federal Reserve would restart a third round of debt purchases under quantitative easing.
The greenback’s gains were limited as the unemployment rate rose and job gains in the previous month were revised lower. Members of German Chancellor Angela Merkel’s coalition parties signaled they won’t stand in the way of European Central Bank President Mario Draghi’s plan to buy government bonds. A report today is forecast to show U.S. service industries grew at the slowest pace since 2010.
“The reaction speaks to diminished QE3 odds,” Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York, said in a telephone interview. “Printing north of 150,000 ever so slightly reduces the odds of another round of QE.”
The dollar appreciated 0.6 percent to 78.68 yen at 8:59 a.m. New York time. The U.S. currency fell 0.6 percent to $1.2256 per euro.
Payrolls increased 163,000 following a revised 64,000 rise in June that was less than initially reported, Labor Department figures showed today in Washington. The median estimate of 89 economists surveyed by Bloomberg News called for a gain of 100,000. Unemployment rose to 8.3 percent, from 8.2 percent.
Dollar Index
The Dollar Index, which International Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, fell 0.5 percent. It gained 0.7 percent on July 6, when the last payrolls report showed the number of new jobs in June fell short of the 100,000 forecast in a Bloomberg survey. The gauge rose 0.1 percent on Oct. 7, when the Labor Department said employers added 103,000 positions in September, versus a Bloomberg forecast of 60,000.
The euro gained earlier versus the greenback after retail sales in the currency region unexpectedly increased in June. New Zealand’s dollar rose after Standard & Poor’s affirmed the nation’s credit rating and said the outlook was stable.
The U.S. currency has advanced versus the euro this year as investors sought safety amid speculation Europe’s financial turmoil was worsening and U.S. growth was slowing. The greenback rose 3 percent in July against the common currency.
The Fed said Aug. 1 after a policy meeting it “will provide additional accommodation as needed” to spur growth and employment, while it refrained from expanding monetary easing this month. It said it will “closely monitor incoming information on economic and financial developments.”
Quantitative Easing
The central bank bought $2.3 trillion of assets in two rounds of a stimulus strategy called quantitative easing between December 2008 and June 2011. It has kept its benchmark interest rate at zero to 0.25 percent since December 2008 and is swapping $667 billion in short-term debt in its holdings for longer-term securities through year-end to cap borrowing costs. Traders call the program Operation Twist after a similar effort in the 1960s.
ECB officials are working on a plan to buy bonds and details will be released in coming weeks, Draghi told reporters yesterday after a policy meeting. The bank kept its key interest rate at a record low 0.75 percent.
The Institute for Supply Management’s non-manufacturing index, a gauge of U.S. service industries, slipped to 52 in July, economists in a Bloomberg survey forecast before the Tempe, Arizona-based group reports the data at 10 a.m. It would be the lowest level since January 2010’s 50.5, after falling to 52.1 in June. Fifty is the dividing line between expansion and contraction.
To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net
