BLBG: Dollar Rises to 7-Year High Versus Yen as Euro Slides Before ECB
The dollar strengthened to a seven-year high against the yen before U.S. data this week that economists say will back the case for higher interest rates as Japan and Europe ease policy.
The greenback advanced to its strongest level in two years against the euro before the European Central Bank meets tomorrow. It reached a four-year high versus the Aussie after a report showed Australia’s growth was less than analysts forecast. Russia’s ruble climbed from a record low versus the dollar even amid signs the economic slowdown is deepening. Federal Reserve Vice Chairman Stanley Fischer said yesterday low oil prices are a boon to the U.S. economy.
“The dollar’s uptrend is likely to continue and that’s driven equally, if not more, by what’s going on outside the U.S. as well as what’s happening in the U.S.,” said Steven Barrow, head of Group-of-10 foreign exchange research at Standard Bank Plc in London. “We will probably see a shift in the Fed’s language at the meeting this month. One of our favorite strategies is to sell the euro against the dollar.”
The dollar rose 0.2 percent to 119.44 yen as of 7:01 a.m. New York time after reaching 119.48, the highest since August 2007. It appreciated 0.5 percent to $1.2324 per euro and touched $1.2321, the strongest level since August 2012. The euro weakened 0.3 percent to 147.20 yen.
Standard Bank’s Barrow said the dollar may strengthen to $1.10 per euro in the next 12 months.
Index Rises
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 trading partners, added 0.2 percent to 1,113.42, set for the highest close since March 2009. The gauge has risen 9.1 percent in 2014, on course for its best year since Bloomberg started compiling the data in 2004, boosted by speculation the Fed is moving toward raising interest rates.
Technical analysts at SEB AB have some advice for currency traders: “Don’t ever miss an opportunity to buy dollars (again).” That’s the assertion from Dag Muller and Anders Soderberg in an e-mailed report today. They predicted a “bullish extension higher” for Intercontinental Exchange Inc.’s Dollar Index, which added 0.3 percent today and jumped 0.8 percent yesterday.
The greenback may be heading to $1.2290 per euro after a key resistance level of $1.2358 was broken, they said. Resistance refers to an area on a price graph where analysts anticipate sell orders may be grouped.
Labor Data
The dollar has been buoyed by a strengthening labor-market recovery. U.S. employers added at least 200,000 jobs for a 10th month in November, according to economists surveyed by Bloomberg News before the data are released on Dec. 5.
Falling oil prices may spur U.S. consumption, Fischer told a CEO Council conference in Washington. He said officials are closer than they were “a few months ago” to dropping a pledge to keep interest rates low for a “considerable time.”
Brent crude slumped to a five-year low of $67.53 a barrel on Dec. 1. The price was $70.71 in London today.
The Fed stopped buying bonds under its quantitative-easing strategy in October, even as the Bank of Japan expanded its monetary base and the ECB considered starting its own sovereign bond-buying program.
“Optimism over the economic outlook is fueling dollar buying,” said Yasuhiro Kaizaki, vice president for global markets at Sumitomo Mitsui Trust Bank in New York. “There’s a view emerging in the market that it wouldn’t be odd if the ECB announced this week that it was going to start buying government bonds.”
Russia’s ruble gained 1.3 percent to 53.169 per dollar after depreciating to a record 54.909 versus the U.S. currency. It strengthened 1.9 percent to 65.575 per euro.
Best Performer
The U.S. currency has gained 9.8 percent in the past year, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro fell 1.5 percent and the yen dropped 7.3 percent, the biggest decline.
Australia’s dollar weakened against most of its 16 major peers today after the Bureau of Statistics said gross domestic product advanced 0.3 percent in the third quarter from the previous three months. The result was less than the weakest estimate of 29 economists in a Bloomberg survey that had a median forecast of 0.7 percent.
The Aussie dropped 0.3 percent to 84.19 U.S. cents, after reaching 83.89 cents, the least since July 2010. New Zealand’s dollar weakened 0.5 percent to 77.64 U.S. cents, extending a 0.8 percent decline from yesterday.
To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Kevin Buckland in Tokyo at kbuckland1@bloomberg.net
To contact the editors responsible for this story: Paul Dobson at pdobson2@bloomberg.net Keith Jenkins, Mark McCord
