BLBG:Dollar Index Approaches Highest Since August Before Payroll Data
The Dollar Index (DXY) approached the highest level since August before a U.S. report forecast to show payrolls increased in March, underpinning optimism the world’s biggest economy is recovering.
The euro snapped a two-day gain versus the dollar after a report showed retail sales in the 17-nation region dropped in February. The yen headed for its biggest weekly decline against the dollar in a month after the Bank of Japan (8301) expanded monetary stimulus at a policy meeting yesterday. Federal Reserve Vice Chairman Janet Yellen said she was encouraged by signs of improvement in the U.S. economy.
“The dollar is becoming more of a pro-cyclical currency,” said Ian Stannard, head of European currency strategy at Morgan Stanley in London. “If we get a positive surprise from U.S. payrolls we are likely to see the dollar regaining ground and it could be the catalyst for a move higher against the yen.”
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, gained 0.1 percent to 82.747 at 10:50 a.m. London time after rising to 83.494 yesterday, the highest level since Aug. 2.
The dollar strengthened 0.1 percent to $1.2923 per euro after weakening 0.9 percent in the previous two days. The U.S. currency was little changed at 96.26 yen, having risen 2.1 percent this week, the most since the period ended March 8. The euro dropped 0.2 percent to 124.39 yen.
U.S. employers added 190,000 workers last month after taking on 236,000 in February, according to a Bloomberg News survey before today’s Labor Department report. The jobless rate held at 7.7 percent, the lowest level since December 2008, a separate survey showed.
Encouraging Signs
Yellen said she was “encouraged by recent signs that the economy is improving and healing from the trauma of the crisis,” in a speech yesterday in Washington. “Housing is really beginning to recover in a way that I think is very convincing.”
Retail sales in the euro area fell 0.3 percent from January, when they rose a revised 0.9 percent, the European Union’s statistics office in Luxembourg said.
European Central Bank President Mario Draghi said officials “stand ready to act” to bolster the flagging economy, while keeping borrowing costs at a record-low 0.75 percent at a policy meeting in Frankfurt yesterday.
“Data-wise things are still going to be very weak within Europe and that is going to keep the ECB in a dovish mode,” Morgan Stanley’s Stannard said. “In the longer term we are bearish and think the weak data will catch up with the euro.”
Monthly Decline
The euro has weakened 0.9 percent this month, according to Bloomberg Correlation Weighted Indexes that track 10 developed- nation currencies. The yen slid 3.3 percent, the worst performer, and the dollar gained 0.1 percent.
The yen tumbled at least 3 percent against all 16 of its major counterparts yesterday after the BOJ said it would double the monetary base by the end of 2014. Policy makers also temporarily suspended a cap on some bond holdings and dropped a limit on debt maturities at the two-day meeting.
“It’s just jittery markets overall but with the BOJ having delivered much more than most had expected, the bias short-term in dollar-yen is higher,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong.
To contact the reporter on this story: Neal Armstrong in London at narmstrong8@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
