BLBG: Dollar Advances as Employment Gains Lift Bets Economy Recovering
The dollar extended gains against the yen and euro after hiring in the U.S. increased more than forecast last month, adding to evidence the nation’s economy is recovering.
The euro weakened earlier versus most of its 16 major counterparts after a report confirmed the region’s manufacturing sector contracted in October. The yen headed for a third weekly decline against the U.S. currency as economic weakness and disappointing corporate earnings spurred speculation the Bank of Japan (8301) will expand monetary easing. The greenback rallied yesterday after reports showed manufacturing expanded and initial jobless claims declined.
“The report was pretty encouraging overall,” Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York, said in a telephone interview. “The unemployment rate was able to hold onto most of the improvement that we saw last week. It’s also indicative of a little bit stronger pulse in the labor market over the last couple of months.”
The greenback gained 0.7 percent to 80.65 yen at 8:46 a.m. in New York. It rose 0.7 percent to $1.2860 versus the shared European currency. The yen was little changed at 103.70 per euro.
In the last jobs report before next week’s election, a net 171,000 workers were added to payrolls after a 148,000 gain in September that was more than first estimated, Labor Department figures showed today in Washington. The median forecast of 91 economists surveyed by Bloomberg called for an advance of 125,000. The jobless rate rose to 7.9 percent from 7.8 percent as more people entered the labor force.
The dollar rose on Oct. 5 against most its major counterparts after the government’s last report showed the unemployment rate dropped below 8 percent for the first time since January 2009.
‘Grave Concern’
“The dollar can rally on better news,” Sebastien Galy, a senior foreign-exchange strategist at Societe Generale SA in New York, said before the report. “The dollar will appreciate against stale currencies, such the yen.”
Federal Reserve Chairman Ben S. Bernanke called the U.S. jobs picture a “grave concern” in August and last week reaffirmed the central bank would purchase $40 billion of debt a month to depress borrowing costs and spur the economy.
The U.S. currency rose yesterday against the euro and yen after the Institute for Supply Management’s factory index climbed to 51.7 last month, the highest since May, from 51.5 in September. Applications for jobless benefits fell 9,000 to 363,000 in the week ended Oct. 27, the fewest in three weeks, the Labor Department reported yesterday. Last week’s claims data had yet to be influenced by the fallout from Hurricane Sandy.
A gauge of manufacturing in the 17-nation euro area dropped to 45.4 from 46.1 in September, snapping two months of advances, London-based Markit Economics said today. That compares with an initial October estimate of 45.3 published on Oct. 24. A reading below 50 indicates contraction.
To contact the reporter 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
