BLBG:Dollar Advances Before Jobs Data, Bernanke Testimony; Yen Slides
The dollar strengthened before data that economists say will signal improvement in the U.S. job market, boosting the case for Federal Reserve Chairman Ben S. Bernanke to reduce the central bank’s monetary stimulus program.
The yen fell for a second day against most of its 16 major peers on bets Group-of-20 finance ministers and central bankers meeting this week will endorse the Bank of Japan’s monetary easing that aims to stoke inflation to 2 percent. The euro touched a seven-week high versus the yen as Greece cleared the way for the next tranche of international aid. Bernanke speaks to Congress today after telling lawmakers yesterday he would take a wait-and-see stance on slowing stimulus.
“The dollar is generally very well bid,” said Adam Cole, head of Group-of-10 currency strategy at Royal Bank of Canada in London. “The market expectation that the tapering announcement will come in September still looks sensible and nothing Bernanke said yesterday changed that. What we’re now doing, instead of watching the central bank comments, is watching the data.”
The dollar advanced 0.5 percent to 100.12 yen at 7:58 a.m. New York time after earlier gaining 0.8 percent. It appreciated 0.1 percent to $1.3106 per euro. The 17-nation currency gained 0.4 percent to 131.22 yen after touching 131.47, the strongest since May 31.
Bernanke, who’s due to testify to the Senate Banking Committee from 10:30 a.m. in Washington, yesterday said the Federal Open Market Committee wants to assure that the U.S. economy and labor markets have sufficient momentum before reducing asset purchases.
QE Pace
If the economy improved faster than expected, and inflation rose back “decisively” toward the central bank’s 2 percent target, “the pace of asset purchases could be reduced somewhat more quickly,” Bernanke said yesterday. The Fed would also be prepared to increase the pace of its bond purchases -- currently at $85 billion a month -- “for a time, to promote a return to maximum employment in a context of price stability.”
The dollar rose against all but three of its major counterparts before Labor Department data that economists said will show first-time claims for jobless benefits decreased by 15,000 to 345,000 in the week ended July 13.
Analysts in a separate Bloomberg survey estimate the number of jobless-benefit claimants fell by 18,000 to 2.96 million in the week ended July 6.
Investors may need to wait to benefit from betting on a stronger dollar, according to Jeremy Stretch, head of currency strategy in London at Canadian Imperial Bank of Commerce, the fifth-most accurate currency forecaster in a Bloomberg Rankings survey for the second quarter.
‘Additional Traction’
“It will be the case that over the next two or three months we may continue to oscillate within ranges,” Stretch said in an interview on Bloomberg Television’s “The Pulse” with Guy Johnson. “As we go towards the end of this quarter or beginning of next quarter, as we do get into better data or the prospect of a degree of tapering, that’s the time we’ll see the dollar gaining additional traction.”
The Bloomberg Dollar Index, which tracks the greenback against 10 other major currencies, rose 0.2 percent to 1,034.11 after climbing 0.2 percent yesterday.
The yen weakened for the fourth time in five days against the greenback after Russian Deputy Finance Minister Sergei Storchak said the G-20 probably won’t call for a tapering of stimulus in nations including Japan.
“I don’t yet see a pressing need to demand anything from countries that are conducting quantitative easing,” Storchak said in Moscow on July 16 before G-20 policy makers meet in the Russian capital this week. “Europe, the U.S., and Japan aren’t ready in the current environment to turn away from easy-money policies.”
BOJ Purchases
The BOJ doubled monthly bond purchases to more than 7 trillion yen in April after Prime Minister Shinzo Abe urged the central bank to take steps to overcome deflation. Polls have shown Abe’s Liberal Democratic Party and coalition partners are likely to win a majority in the upper house election this weekend, ending a split parliament.
Japan’s currency lost 22 percent in the past year, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, as Abe and BOJ Governor Haruhiko Kuroda pursued a policy of monetary accommodation to boost the Japanese economy. The euro strengthened 9 percent and the dollar gained 1.3 percent.
‘Further Accommodation’
“We see the yen weakening further,” said Kengo Suzuki, the chief currency strategist at Mizuho Securities Co. in Tokyo, a unit of Japan’s third-biggest bank by market value. “Markets will expect additional easing once they are convinced that the BOJ will undershoot its price target, so Japan’s monetary policy is tilted toward further accommodation.”
Greek lawmakers passed a bill that puts thousands of state workers on notice for possible dismissal, a victory for Prime Minister Antonis Samaras that clears the way for the country’s next bailout installment. The vote came hours before German Finance Minister Wolfgang Schaeuble arrives in Athens for a one-day visit.
“Greece’s passage of the austerity bill may halt a decline in the euro in the near term,” said Mizuho’s Suzuki.
To contact the reporters on this story: Lucy Meakin in London at lmeakin1@bloomberg.net; Joseph Ciolli in New York at jciolli@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
