BLBG: Dollar Gains as Jobless Claims Fall to 5-Year Low; Rupee Drops
The dollar advanced to a two-week high against the yen as initial jobless claims over the past month fell to a five-year low, boosting the case for Federal Reserve to reduce stimulus.
The U.S. currency gained for a second day versus the euro before U.S. reports forecast to show housing prices climbed and a gauge of leading indicators rose. Minutes of the Federal Open Market Committee meeting released yesterday showed most members were “broadly comfortable” with the plan to trim stimulus this year. India’s rupee slumped to a record and Malaysia’s ringgit fell to a three-year low. Sweden’s krona strengthened versus its major counterparts as the unemployment rate declined.
“We seem to be on track for an announcement at the FOMC meeting in September, the question is more how much are they going to reduce quantitative easing,” said Niels Christensen, chief currency strategist at Nordea Bank AB in Copenhagen. “That’s what’s occupying people right now” and supporting the dollar, he said.
The dollar rose 0.8 percent to 98.50 yen at 8:41 a.m. in New York after advancing to 98.81, the strongest level since Aug. 5. The U.S. currency rose 0.1 percent to $1.3337 per euro. The euro climbed 0.7 percent to 131.36 yen after appreciating to 131.65 yen, the highest since Aug. 2.
The number of claims in the month ended Aug. 17 declined to 330,500 a week on average, the least since November 2007, a Labor Department report showed today in Washington. Compared with a week earlier, claims rose by 13,000 to 336,000, in line with the median forecast of 48 economists surveyed by Bloomberg.
Fed Tapering
An index of U.S. house prices climbed 0.6 percent in June after rising 0.7 percent the previous month, according to a Bloomberg survey before the Federal Housing Finance Agency releases the report. The Conference Board’s gauge of the outlook for the next three to six months climbed 0.5 percent in July, after being unchanged a month earlier, a separate survey showed.
The FOMC will reduce its monthly purchases of $85 billion in bonds at its next meeting on Sept. 17-18, according to 65 percent economists in an Aug. 9-13 Bloomberg survey. The median estimate is a cut to $75 billion each month.
“Almost all committee members agreed that a change in the purchase program was not yet appropriate,” and a few said “it might soon be time to slow somewhat the pace of purchases as outlined in that plan,” according to the record of the Federal Open Market Committee’s July 30-31 gathering.
Rupee Slides
The Bloomberg U.S. Dollar Index advanced 0.2 percent to 1,029.02 after rising to 1,031.37, the highest since Aug. 2.
The dollar appreciated 5.2 percent this year, the best performer after the euro among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro advanced 6.3 percent, while the yen slumped 8.8 percent.
India’s rupee slumped for a sixth day as the Fed minutes showed the U.S. is getting closer to reducing stimulus that has fueled demand for emerging-market assets.
Global funds have cut their holdings of Indian debt by $10.1 billion since Fed Chairman Ben S. Bernanke first flagged the tapering on May 22, leaving the rupee vulnerable to the nation’s current-account deficit.
“Some of the reasons for the rupee’s fall are out of India’s control, which is probably why policy makers have stepped back a bit and let the rupee find its own equilibrium,” said Jonathan Cavenagh, a strategist at Westpac Banking Corp. in Singapore. “The longer-term issue is that India needs to suppress its current-account deficit, and that’s something policy makers should focus on.”
The rupee slid 1.1 percent to 64.7637 per dollar after weakening to a record 65.56. The currency may drop to 68 or even 70 by next week, Westpac predicts.
Malaysia’s ringgit slipped 0.5 percent to 3.3095 per dollar after depreciating to 3.3228, the weakest since June 2010.
Euro Services
The euro extended its advance against the yen after London-based Markit Economics said an index of services in the 17-nation region rose to 51 this month from 49.8 in July. A composite gauge of services and manufacturing climbed to 51.7 from 50.5. Readings above 50 indicates expansion.
The krona rose for the first time in three days against the euro after Statistics Sweden said the seasonally adjusted unemployment rate dropped to 7.8 percent in July from a revised 7.9 percent the previous month.
The Swedish currency gained 1 percent to 8.6903 per euro and strengthened 0.8 percent to 6.5170 per dollar.
To contact the reporters on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net; John Detrixhe in New York at jdetrixhe1@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
