BLBG: Dollar Rallies as November Employment Gains Exceed Forecasts
The dollar gained after a report showed the economy added more jobs last month than forecast and the jobless rate fell to a five-year low, boosting speculation the Federal Reserve will reduce monetary stimulus next month.
The greenback rallied against the yen as the Labor Department reported payrolls increased by 203,000 in November, versus the median forecast in a Bloomberg News survey for a 185,000 advance. The October jobs gain was revised up to 200,000 and the November unemployment rate fell to 7 percent from 7.3 percent The Fed has been buying $85 billion of bonds a month to support the economy and cap borrowing costs. The yen weakened earlier against the dollar after the head of an advisory panel called on Japan’s Government Pension Investment Fund to start cutting domestic debt holdings.
“It’s on the strong side and obviously NFP above 200,000 for the second month in a row helps the case for a taper sooner rather than later,” said Brad Bechtel, managing director at Faros Trading LLC in Stamford, Connecticut, said in a telephone interview. The report signals “dollar yen higher and emerging-market weakness,” he said.
The dollar rose 0.9 percent to 102.70 yen at 8:44 a.m. in New York. The Bloomberg U.S. Dollar Index, which tracks the U.S. currency against 10 major counterparts, added 0.4 percent to 1,021.55.
Market Reaction
The Bloomberg U.S. Dollar Index climbed to an almost two-month high on Nov. 8 after a Labor Department report showed the economy added more jobs than forecast in October. Payrolls grew by 204,000 in October, versus the median forecast in a Bloomberg News survey for a 120,000 advance.
Minutes of the Fed’s Oct. 29-30 meeting showed policy makers “generally expected” improvement in employment data that would “warrant trimming the pace of purchases in coming months.” Chairman Ben S. Bernanke said last month the central bank will probably hold down its target interest rate long after ending the program.
The Fed will pare its buying to $70 billion at its March 18-19 meeting, according to the median of 32 economist estimates in a Bloomberg survey last month. The next gathering is Dec. 17-18.
The U.S. economy expanded in the third quarter at a faster pace than initially reported, led by the biggest increase in inventories since early 1998. Gross domestic product climbed at a 3.6 percent annualized rate, up from an initial estimate of 2.8 percent and the strongest since the first quarter of 2012, Commerce department figures showed in Washington yesterday.
Yen Weakens
Japan’s currency dropped as pension fund advisory group chairman Takatoshi Ito said the 124 trillion yen ($1.21 trillion) fund should trim local bonds immediately to its lower limit of 52 percent of assets. The fund’s portfolio was 58 percent comprised of Japanese debt as of Sept. 30, according to the latest quarterly report on its website.
“The Ministry of Health has given an OK to everything that was said in the report,” Ito said in an interview in Tokyo. “GPIF needs to start reducing bonds as soon as possible to its lower limit of 52 percent.”
The yen has tumbled 13.8 percent this year, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro climbed 8.1 percent and the dollar gained 4.1 percent.
To contact the reporters on this story: Andrea Wong in New York at awong268@bloomberg.net; John Detrixhe in New York at jdetrixhe1@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
