BLBG: Dollar Rises Most Since June as U.S. Payrolls Spur Fed Bets
By Oliver Biggadike and Ruby Madren-Britton
Dec. 4 (Bloomberg) -- The dollar rose the most since June against the currencies of major U.S. trading partners as the payrolls report encouraged traders to boost bets on Federal Reserve rate increases.
The yen headed for its first weekly decline against the dollar since October on speculation Japan’s currency will regain its status as the primary funding vehicle for higher-yielding investments. Canada’s dollar rose as the nation added more than five times as many jobs as economists forecast. The euro fell against counterparts such as the South African rand and the Polish zloty.
“This is a good number,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York, in reference to the jobs report. “High-yielding currencies are doing well, Poland is doing well in Eastern Europe. Across the board, risk-on trades are back on after much- better-than-expected jobs data.”
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, increased 1.2 percent to 75.525 at noon in New York, the most based on closing prices since June 5.
The gauge has fallen about 19 percent from a three-year high reached in March, dropping on speculation that the Fed would be slow in raising borrowing costs.
Futures on the Chicago Board of Trade showed a 53 percent chance that the Fed will raise the target lending rate by at least a quarter-percentage point by the June meeting, up from 43 percent yesterday. A week ago the likelihood was 31 percent.
Dollar Versus Yen
The dollar increased 1.8 percent to 89.88 yen, from 88.26 yesterday. The dollar appreciated 1.1 percent to $1.4885 per euro, from $1.5053. The euro climbed 0.7 percent to 133.80 yen, from 132.87.
Employers eliminated 11,000 jobs in November after a revised reduction of 111,000 in the previous month, the Labor Department reported today. The median forecast of 82 economists in a Bloomberg survey was for a reduction of 125,000 jobs. The unemployment rate decreased to 10 percent.
The last time the Dollar Index rose after a payrolls report exceeded expectations was on Aug. 7, when it climbed 1.2 percent. Employers eliminated 247,000 jobs in July, compared with the median forecast of 325,000.
Canada’s currency advanced for the first time in three days versus its U.S. counterpart, gaining 0.7 percent to C$1.0504 on the nation’s job gains last month.
Poland’s zloty climbed for a fourth day versus the euro, advancing as much as 1.5 percent to 4.0363, the strongest level since Jan. 12. The rand appreciated as much as 1.6 percent to 10.9839 against the euro.
Juncker on Yuan
Luxembourg’s Jean-Claude Juncker, who heads the group of euro-area finance ministers, said the euro is “clearly overvalued” against the dollar and the yuan.
“We urged the Chinese to let the yuan appreciate versus the euro because in the long term, it’s not possible that the economy, which grows at the fastest pace in the world at the moment, constantly depreciates” its currency, Juncker said at a press conference in Luxembourg today. “We want to change this situation as fast as possible.”
The yuan has traded at about 6.83 per dollar since July 2008 after a 21 percent gain in the previous three years. The link of the yuan to the weakening dollar has pushed the Chinese currency down 13 percent versus the euro over the past year, adding to pressure from China’s export competitors to let the yuan appreciate.
ECB’s Stance
European Central Bank President Jean-Claude Trichet took a step yesterday toward removing emergency stimulus measures designed to end the recession, telling reporters in Frankfurt the need had diminished. The main refinancing rate stayed at a record low 1 percent.
The central bank will link the rate on its last 12-month tender on Dec. 15 to the average of its benchmark over the year, instead of charging a fixed 1 percent as it did in previous offers, Trichet said. The final six-month operation will be held in March, he said.
The yen gained 4.3 percent versus the U.S. currency in November, helping to erode profits of exporters including Sony Corp. and Toyota Motor Corp. It reached a 14-year high of 84.83 against the dollar on Nov. 27.
Japan’s Vice Finance Minister Rintaro Tamaki met with U.S. Treasury officials this week in Washington, spurring speculation the two nations are discussing how to cap the yen.
“It would be good for the yen to weaken a little more,” Japanese Deputy Prime Minister Naoto Kan said in Tokyo today.
To contact the reporters on this story: Ruby Madren-Britton in New York at rmadrenbritt@bloomberg.net; Oliver Biggadike in New York at obiggadike@bloomberg.net
