BLBG:Dollar Reaches 10-Month High as Jobs Gains Dim Outlook for More Fed Easing
The dollar strengthened, touching a 10-month high versus the yen, as better-than-forecast payrolls damped Federal Reserve monetary stimulus speculation.
The euro fell for a second week against the dollar as Greece’s use of collective-action clauses forcing investors to take losses under the nation’s debt restructuring will trigger payouts on $3 billion of default insurance. Mexico’s peso and Canada’s dollar rose against their 16 most-traded currencies amid stronger economic data for their biggest trading partner. The Dollar Index reached three-week high before the central bank holds and policy meeting March 13.
“The payrolls news sets the stage for the Fed finding it increasingly difficult to talk about further quantitative easing,” said Shahab Jalinoos, a senior currency strategist in Stamford, Connecticut, for UBS AG. “A trend of stronger dollar seems to be establishing itself. The currencies that are bucking that trend seem to be Mexican peso and Canadian dollar, which people see as better variations of the U.S. dollar.”
The dollar added 0.8 percent to 82.46 yen in New York, its fifth week of gains, the longest streak since March 2009. The euro fell 0.6 percent to $1.3123, in its first back-to-back weekly loss since Jan. 13. The Japanese currency weakened 0.2 percent to 108.22 per euro.
Futures Data
Futures traders increased net bets that the euro will weaken against the dollar. Wagers the shared currency will fall against the greenback exceeded those that will rise by 116,473 for the week ended March 6, figures from the Commodity Futures Trading Commission show.
Hedge funds and other large speculators are betting that the yen will fall against the dollar. Net-shorts for the yen were 19,358, compared with 1,203 a week earlier, the first time the market was net-short yen since May. A short is a bet that an asset will decline in value.
The euro reached a one-week high on March 8 amid speculation Greece had attracted enough public-sector involvement to carry out its debt-swap. It weakened as a report showed the region’s economy contracted last quarter. Europe’s gross domestic product shrank 0.3 percent from the third quarter, the region’s statistics office said March 6.
The European Central Bank kept its benchmark interest rate unchanged on March 8 and President Mario Draghi said recent surveys showed signs of regional economic stabilization.
European News
“Investor mindset is such that they’re just shunning European-denominated assets,” Samarjit Shankar, a managing director for the foreign-exchange group in Boston at Bank of New York Mellon Corp. said March 6. “You see this spate of news flow coming out showing that leading policy makers around the world coming to terms with growth being at a premium.”
The Dollar Index (DXY), which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, advanced 0.6 percent to 79.959.
It touched 80.061, the highest since Feb. 16 as U.S. nonfarm payrolls increased by 227,000 in February after rising by a revised 284,000 the prior month, data from the Labor Department showed yesterday. The unemployment rate held at a three-year low of 8.3 percent.
“If the data continue to improve, however gradually, the markets should begin preparing themselves for the good Dr. Fed to wean them from their dependency rather than administer further dosage,” Federal Reserve Bank of Dallas President Richard Fisher said March 5 in a speech in Dallas.
Canada Jobs
Canada’s dollar was the second-best performer against its U.S. counterpart this week as the better-than-forecast payrolls in its largest trading partner outweighed a weaker-than- projected domestic report.
The Canadian currency weakened 0.1 percent to 99.05 cents per U.S. dollar. It touched C$1.0029 on March 6, the weakest level since Feb. 27. Mexico’s peso rose 0.9 percent to 12.6425 per dollar.
Japan’s yen weakened after reported a record current- account deficit, the biggest shortfall since comparable data began in 1985, undermining the currency’s haven status.
The yen’s weakness against growth-linked currencies such as the Australian and New Zealand dollars, after China said it will lower its target for economic growth to 7.5 percent, compared to 9.2 percent in 2011.
The yen has declined 6.9 percent in the past three months, the worst performer among the 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar fell 0.5 percent, and euro slid 2.7 percent.
Carry Trade
Borrowing yen at almost zero percent to invest in Australia’s dollar, Mexico’s peso, Brazil’s real and South Korea’s won returned 0.4 percent this week, according to data compiled by Bloomberg. The trade using euros would result in a 0.7 percent gain compared with a 0.6 percent loss using dollars.
Norway’s krone weakened after Trade Minister Trond Giske said its strength was hurting exports. Verbal intervention has increased in an attempt to contain the krone’s ascent after the currency climbed to a nine-year high of 7.3884 per euro this month. The krone fell 1.7 percent to 5.7007 per dollar and 1.1 percent to 7.4805 per euro.
Brazil’s real tumbled 3.5 percent to 1.7912 per dollar. It touched 1.7943, the weakest since Jan. 13.
The Brazilian government may reduce the maturity of short- term trade loans backed by export contracts, known as ACC, from 360 days currently, Sao Paulo-based newspaper Valor Economico reported March 7. It may also impose a tax on loans from companies outside Brazil to subsidiaries in the country, Valor said.
To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
