BLBG:Dollar Gains 2nd Day Versus Yen Before ADP Jobs Data
The euro weakened for a third day against the dollar after reports showed European manufacturing shrank for a ninth month and unemployment rose in Germany, adding to concern slowing growth will worsen the debt crisis.
The 17-nation currency dropped to a two-week low versus the yen on speculation European policy makers meeting tomorrow will signal they are moving closer to cutting interest rates to spur growth. The dollar strengthened against all except one of its 16 major counterparts before a U.S. report that economists said will show companies added workers in April.
“These weak numbers reflect the deterioration we’ve been seeing in the euro zone, and what’s worrying is that this is not limited to troubled countries,” said Ian Stannard, head of European currency strategy at Morgan Stanley in London. “We expect the euro to come under significant pressure on the back of these reports.”
The euro fell 0.8 percent to $1.3134 at 6:57 a.m. in New York, the biggest intraday decline since April 23. The shared currency dropped 0.5 percent to 105.45 yen. It earlier slid to 105.43 yen, the weakest level since April 17. The dollar gained 0.3 percent to 80.29 yen.
The euro depreciated against all but one of its 16 major peers as London-based Markit Economics said its gauge of euro- region manufacturing slipped to a 34-month low of 45.9 in April from 47.7 in March. A reading below 50 shows contraction.
German Unemployment
The number of people out of work in Germany increased a seasonally adjusted 19,000 last month to 2.87 million, the Nuremberg-based Federal Labor Agency said. Economists surveyed by Bloomberg forecast a decline of 10,000. Yields on Germany’s two-, five-, 10-, and 30-year bonds dropped to record lows.
European Central Bank President Mario Draghi may “begin to hint that the outlook for the European economy is clearly beginning to deteriorate again,” said Robert Rennie, chief currency strategist at Westpac Banking Corp. (WBC) in Sydney. “Within the next couple of months, the possibility of further rate cuts from the ECB is rising.”
The ECB will keep its benchmark interest rate at a record- low 1 percent at tomorrow’s meeting in Barcelona, according to all of the 58 economists surveyed by Bloomberg News.
Spain will auction three- and five-year notes tomorrow amid speculation that the euro area’s fourth-largest economy will follow Greece, Ireland and Portugal in seeking a bailout. France and Greece hold elections on May 6.
The euro has weakened 6.6 percent over the past 12 months, the worst performance of the 10 developed-nation currencies tracked by Bloomberg Correlation Weighted Indexes. The dollar climbed 6.4 percent, and the yen appreciated 6 percent.
Dollar Gains
The Dollar Index (DXY) climbed to a one-week high before ADP Employer Services releases its workforce figures today. U.S. companies added 170,000 workers in April after a 209,000 increase the previous month, according to a Bloomberg survey.
Three voting members of the Federal Open Market Committee said they don’t see a need to ease policy further as the economy expands. John Williams, president of the San Francisco Fed, joined his counterparts from Richmond, Philadelphia and Atlanta yesterday in casting doubt on the need for additional purchases of bonds to cap longer-term interest rates.
Fed Bank of Richmond President Jeffrey Lacker said yesterday that more monetary stimulus risks stoking inflation. He is scheduled to speak on the economic outlook in Norfolk, Virginia today.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, gained 0.6 percent to 79.258 after rising to 79.298, the highest since April 25.
‘Significant Issue’
The yen fell for a second day versus the dollar after Moody’s Investors Service said the role of lawmaker Ichiro Ozawa in Japan’s tax reform talks may have an impact on the country’s credit rating.
An increase in the country’s consumption tax “is a significant issue that hasn’t been resolved yet,” Tom Byrne, senior vice president at Moody’s told reporters in Manila. “Ozawa’s role in the debate, there could be implications there, but right now we don’t see anything.”
To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
