BLBG:Dollar Index Approaches 11-Week High on Fed Bets; Aussie Slides
The Bloomberg U.S. Dollar Index rose toward an 11-week high before U.S. reports today that economists said will show American companies boosted hiring last month and service industries expanded.
The U.S. currency advanced against 11 of its 16 major peers on bets today’s data and the monthly payroll report on Friday will add to signs the recovery is gaining momentum and spur the Federal Reserve to start reducing stimulus. Australia’s dollar slumped to a three-month low after the economy expanded less in the third quarter than analysts forecast. Canada’s dollar fell to the weakest in three years before the central bank announces a policy decision today.
“The U.S economy is surprisingly strong,” said Carl Hammer, a currency strategist at SEB AB in Stockholm. “All barometers are signaling good momentum. We have had a decent move higher in dollar-yen on the expectation payrolls will be strong and that we may get tapering in December.”
The Bloomberg Dollar Index, which tracks the U.S. currency against 10 major counterparts, gained 0.1 percent to 1,021.84 at 7:02 a.m. in New York after rising to 1,025.36 yesterday, the highest level since Sept. 13.
The dollar was little changed at 102.49 yen after climbing to 103.38 yesterday, the highest since May 23. The U.S. currency was also little changed at $1.3590 per euro. The yen traded at 139.27 per euro.
Payroll Growth
U.S. companies added 170,000 workers in November, the most in five months, according to a Bloomberg News survey before ADP Research Institute issues the data today. The Institute for Supply Management will say its non-manufacturing index was 55 from 55.4 in October, a separate survey showed. Readings above 50 indicate growth.
American employers hired 181,000 workers last month after adding 204,000 in the previous month, economists said before the Labor Department releases the figure on Friday.
Fed officials, who next meet on Dec. 17-18, said they may reduce the central bank’s $85 billion in monthly bond purchases “in coming months” as the economy improves, according to minutes of their October meeting released last month.
The dollar has gained 3.9 percent this year, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The euro appreciated 7.3 percent, while the yen slumped 14 percent.
A measure of volatility among major currencies increased for a third day.
JPMorgan Chase & Co.’s Group of Seven Volatility Index climbed 11 basis points, or 0.11 percentage point, to 8.54 percent, the highest since Oct. 10. The gauge has increased from this year’s low of 7.48 on Oct. 28.
Aussie Slides
Australia’s dollar slumped the most since July against the U.S. currency as the slowdown in growth damped demand for the South Pacific nation’s assets.
Gross domestic product expanded 0.6 percent in the third quarter from the previous three months when it rose a revised 0.7 percent, the statistics bureau said. The median forecast in a Bloomberg News survey was for 0.7 percent growth.
“It’s a disappointing GDP number and we’re currently running significantly below trend, so clearly the Australian economy requires further stimulus,” said Robert Rennie, global head of foreign-exchange and commodity strategy at Westpac Banking Corp. in Sydney. “The Aussie has weakened but we’re beginning to show signs of basing in the low 90s.”
The Australian dollar fell 1.3 percent to 90.23 U.S. cents after sliding to 90.08, the weakest level since Sept. 3. The decline is the biggest since July 30.
Loonie Weakens
Canada’s dollar dropped 0.2 percent to C$1.0665 versus its U.S. counterpart after sliding to C$1.0678, the weakest level since June 2010.
The Bank of Canada will leave its lending rate at 1 percent today, according to the median estimate of economists surveyed by Bloomberg News.
Traders are increasing bets on the Canadian dollar weakening further, options prices show.
The premium traders pay for options to buy the dollar against the loonie on a one-week basis, versus the right to sell, was 72 basis points, 25-delta risk reversals show. The measure increased to 78 basis points on Dec. 2, the most since July 9, based on closing prices.
To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
