BLBG:Dollar Rises to Week-High Versus Euro as Fed Damps Easing
The dollar rose to a more than one- week high versus the euro as signs of improving U.S. employment support the Federal Reserve’s decision to hold off from increasing monetary accommodation.
The U.S. currency rose against 14 of its 16 major peers ahead of a private report forecast to show job gains held near the most in two months. The euro fell toward the week low reached yesterday against the yen as European Central Bank officials prepare to meet on policy amid evidence of slowing growth. Australia’s dollar sank to an 11-week low as data showed the nation had an unexpected trade deficit.
“U.S. monetary policy will stay status quo for the foreseeable future,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest-rate risk- management company. “The U.S. dollar, particularly against the euro, is a bit of a buy at these levels in the short term.”
The dollar climbed 0.3 percent to $1.3193 per euro at 6:05 a.m. in London after earlier reaching $1.3184, the strongest since March 22. It lost 0.2 percent to 82.66 yen. Europe’s shared currency dropped 0.5 percent to 109.05 yen after reaching 108.70 yesterday, the lowest since March 23.
“A couple of members indicated that the initiation of additional stimulus could become necessary if the economy lost momentum,” according to the Fed’s March meeting minutes released yesterday in Washington. That contrasts with the assessment at the January meeting, in which some officials saw current conditions warranting additional action “before long.”
Jobs Data
Figures based on payrolls from ADP Employer Services due to be published today may show U.S. employment increased by 206,000 last month, according to the median estimate of economists surveyed by Bloomberg News. That compares with a gain of 216,000 in February, the biggest in two months.
Data from the Labor Department due tomorrow will probably indicate applications for jobless insurance fell to 355,000 in the week ended March 31, the least since April 2008. A separate report on April 6 is projected to show employment rose by more than 200,000 workers for a fourth-consecutive month.
“We are far below maximum employment and are likely to remain there for some time,” San Francisco Fed President John Williams said yesterday in San Diego. “Under these circumstances, it’s essential that we keep strong monetary stimulus in place. The recovery has been sluggish.”
Growth Forecasts
Williams forecast U.S. economic growth of 2.5 percent this year and 2.75 percent in 2013. That compares with estimated gains in gross domestic product of 2.2 percent this year and 2.4 percent next year, according to median projections in a Bloomberg poll.
The U.S. dollar will be at $1.31 per euro and 84 yen by the end of 2012, a separate survey of financial companies showed.
The euro fell versus the dollar and yen before ECB policy makers gather for an interest-rate decision today. Officials are expected to keep the bank’s key rate unchanged at 1 percent, according to all 57 forecasters polled before the meeting.
Retail sales in the euro-area probably dropped 0.2 percent in February after a 0.3 percent gain the previous month, according to the median estimate in a separate survey.
Nothing New
“I don’t expect anything new out of the ECB meeting,” Rochford’s Averill said. “The European economy is struggling in comparison to the U.S. I think there’s very little economic reason for the euro to appreciate against the U.S. dollar.”
UBS AG said the euro may rise to a five-week high against the greenback, citing trading patterns.
Should the 17-nation euro break above its March 27 high of $1.3386, it may extend gains to $1.3486, matching the Feb. 29 peak, Geoffrey Yu, a currency analyst at UBS, wrote in a report today.
The euro has lost 0.8 percent in the past week, the second- worst performance after the Australian dollar among the 10 developed-nation currencies tracked by Bloomberg Correlation- Weighted Indexes.
The so-called Aussie slid 0.5 percent to $1.0275 and touched $1.0264, the weakest since Jan. 16. New Zealand’s currency fell 0.3 percent to 81.64 U.S. cents. The MSCI Asia Pacific Index (MXAP) of shares lost 1.4 percent.
Australia unexpectedly posted a trade deficit for a second month in February, completing the first consecutive shortfalls in two years. Imports outpaced exports by A$480 million ($493 million), from a revised A$971 million deficit in January, the Bureau of Statistics said in Sydney today. The median estimate in a Bloomberg survey was for a surplus of A$1.1 billion.
“There are some concerns that exports are really slowing, and that’s pretty negative for the Aussie,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore.
Malaysia’s ringgit weakened, snapping a three-day rally, as a drop in fuel prices damped the outlook for exports from Southeast Asia’s third-biggest economy.
Crude oil traded in New York fell for a second day, dropping 0.4 percent to $103.57 a barrel. The Malaysian currency declined 0.5 percent to 3.0640 per dollar, according to data compiled by Bloomberg.
To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
