BLBG:Dollar Index Near 6-Month High Before Jobs Data; Yen Advances
The Dollar Index (DXY) traded 0.1 percent from the highest in more than six months as signs of improvement in U.S. labor market added to the case for the Federal Reserve to end stimulus sooner than initially planned.
Demand for the dollar was supported ahead of data forecast to show U.S. companies added more workers in February. The pound dropped to the lowest since July 2010 before the Bank of England concludes a two-day meeting today. The euro rallied after Standard & Poor’s revised up Portugal’s credit outlook. The yen rose after the Bank of Japan refrained from expanding monetary stimulus at a policy meeting today.
“If non-farm payrolls are strong, you’ll probably continue to see dollar strength,” said Tim Kelleher, the Auckland-based head of institutional foreign-exchange sales at ASB Institutional, a unit of Commonwealth Bank of Australia. (CBA) “People are thinking about the Fed’s exit strategy so that’s helping the U.S. dollar.”
The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against currencies of six U.S. trading partners, fetched 82.486 at 12:43 p.m. in Tokyo from yesterday, when it touched 82.604, the highest since Aug. 20.
The euro climbed 0.2 percent to $1.2989 from yesterday, when it touched 1.2965, the lowest since Dec. 11. The shared currency slid 0.1 percent to 121.90 yen. The pound touched $1.4967, the lowest since July 2010, before trading at $1.5000, down 0.1 percent. The yen added 0.3 percent to 93.82 per dollar.
Labor Market
In the U.S., economists in a Bloomberg News survey estimate the Labor Department will say tomorrow that payrolls increased 163,000 in February after employment rose by 157,000 the prior month, and that data will show the jobless rate held at 7.9 percent.
Figures from New Jersey-based ADP Research Institute yesterday showed an increase of 198,000 in U.S. employment last month, more than the 170,000 advance expected by economists.
The U.S. economy grew at a modest to moderate pace across most of the country amid rising consumer demand for homes and autos, the Federal Reserve said in its Beige Book business survey yesterday.
The anecdotal snapshot of the economy helps the Federal Open Market Committee evaluate whether the labor market shows signs of the substantial improvement it says would warrant shrinking or halting $85 billion in monthly bond purchases. The committee is scheduled to meet March 19-20.
Portugal Outlook
Demand for the euro was bolstered after S&P affirmed Portugal’s rating and raised its outlook to stable from negative. The country’s gross domestic product will return to modest growth in 2014 and 2015, S&P said in a statement today.
“The key really is that S&P is leading the other two ratings agencies with this move, so that, at the margin, helps with euro sentiment,” said Sue Trinh, a Hong Kong-based senior currency strategist at Royal Bank of Canada. “Euro’s underperformance overnight was in part due to speculation that the ECB might cut. There’s a lot of event risk and volatility around the announcement.”
RBC predicts the European Central Bank will leave policy rates unchanged, according to Trinh.
The central bank will probably maintain its benchmark rate at 0.75 percent today, according to economists in a Bloomberg survey. The ECB will update its December economic forecasts.
ECB Forecast
The BOE will keep its interest rate at 0.5 percent, according to economists in a separate Bloomberg poll. Poland’s central bank lowered its seven-day reference rate by 50 basis points to 3.25 percent yesterday. None of the 38 economists surveyed by Bloomberg predicted the move.
“The focus will be what the ECB will do with its economic forecast and how that will change market’s expectation for the next move,” said Daisuke Karakama, a market economist in Tokyo at Mizuho Corporate Bank Ltd. “The European economy will probably have negative growth this year.”
The Bank of Japan (8301) today kept its asset-purchase program at 76 trillion yen ($808.9 billion) and its monthly government bond purchases at 1.8 trillion, in line with estimates of economists surveyed by Bloomberg.
Haruhiko Kuroda, Prime Minister Shinzo Abe’s nominee to succeed BOJ Governor Masaaki Shirakawa this month, has said he will do whatever it takes to end 15 years of deflation.
Nomura Securities Co. reduced its forecasts for the yen. Japan’s biggest brokerage estimated the yen will end 2013 at 93 per dollar from a previous estimate of 90, while it will be at 95 in June from 90 previously.
“It’s becoming clear that powerful monetary easing by the BOJ under Kuroda would support yen weakness,” Yunosuke Ikeda, Nomura’s head of foreign-exchange strategy, wrote in a report today. “Overseas expectations for Abenomics is high.”
Japan’s currency has depreciated 1.3 percent in the past week, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The pound lost 1 percent, while the euro fell 0.3 percent. The dollar gained 0.3 percent.
To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net;
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
