The dollar appreciated to a level stronger than $1.30 against the euro for the first time since early December before a report tomorrow forecast to show employers added jobs for a third month. The euro dropped below the 200-day moving average versus the dollar as the European Union discussed spreading the cost of bank failures. Brazil’s real fell as the central bank set reserve requirements on positions against the dollar held by local banks in a third attempt since October to stem a rally in the currency. “You’re going back to the more fundamental move for the dollar with strong data,” said Fabian Eliasson, head of U.S. currency sales at Mizuho Financial Group Inc. in New York. “It seems that the trend is pointing to a slightly improved jobs market, and that is going to be good going forward.” The dollar appreciated 1.1 percent to $1.3003 per euro at 5 p.m. in New York, from $1.3149 yesterday, after touching $1.2997, the strongest level since Dec. 1. The greenback traded at 83.33 yen, compared with 83.25. The euro decreased 1 percent to 108.35 yen, from 109.47 yen. The euro extended its drop against the dollar on speculation a large option against the greenback expired. “There was a large $1.3125 option expiring at 10 a.m., and it heavily influenced the spot rate,” said John McCarthy, director of currency trading at ING Groep NV in New York. “It was attracting interest.” An option is a contract that gives its holder the right to buy or sell an asset at a fixed price. Senior Bondholders The European Commission will continue today with a plan to spread the cost of bank failures to senior bondholders, the Daily Telegraph reported. The European Union may give regulators power to block new products and limit trading risks at banks deemed too big to fail, as part of plans to protect public finances from future financial crises, according to draft proposals obtained by Bloomberg News. “The ECB is pushing hard to get a recognition that investors share the pain and it doesn’t all go to the sovereigns,” Kit Juckes, head of foreign-exchange research at Societe Generale SA in London, said in an interview with Tom Keene on Bloomberg Radio’s “Bloomberg Surveillance” program. “In Europe, we could have a spark that makes us afraid and makes us one step closer to the abyss again.” Brazil’s real depreciated as much as 1.2 percent to 1.6937 against the dollar, the weakest level since Dec. 27. Short Positions New rules have the potential to reduce short positions in the dollar to $10 billion from $16.8 billion in December as banks seek to avoid paying reserve requirements on currency operations, Aldo Mendes, the central bank’s director of monetary policy, told reporters in Brasilia. A short is a bet an asset will decline in value. Finance Minister Guido Mantega said this week that Brazil’s government is ready to take new measures to prevent the dollar from “melting” and stem the real’s 37 percent rally against the dollar since the beginning of 2009. IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, advanced as much as 0.8 percent to 80.877. The dollar’s four-day advance of 2.24 percent is the biggest since Nov. 10. The dollar’s gain weighed on higher-yielding assets such as stocks and commodities. The Standard & Poor’s 500 Index dropped 0.2 percent, while futures on crude oil fell below $90 a barrel. The yield on the benchmark 10-year Treasury note slid 0.07 percentage point to 3.4 percent. Nonfarm Payrolls A December increase of 150,000 in U.S. nonfarm payrolls is the median forecast of 78 economists in a Bloomberg News survey before tomorrow’s Labor Department report. The jobless rate may drop to 9.7 percent from 9.8 percent. Investors should sell the euro against the pound and Canadian dollar and buy the U.S. dollar versus the yen, Credit Suisse Group AG recommended in a research note. The euro may fall to 81 pence against the pound, according to Credit Suisse, which said traders should abandon bets if the European currency rises to 86.50 pence. The euro dropped 0.9 percent to 84.04 pence. Investors selling the euro against the Canadian dollar should target C$1.2130 and cancel trades if the common currency rises to C$1.3450, the firm said. The euro slid 1 percent to C$1.2960 versus the loonie. When buying the greenback versus the yen, investors should look for an advance to 86 yen and abandon trades if the pair falls to 81.50, according to Credit Suisse. South Korea’s won rose against all of its major counterparts as the Ministry of Knowledge Economy, which oversees industry policy, said exports at LG Chem Ltd. and other petrochemical companies may rise 12 percent this year. The won appreciated 0.5 percent to 1,119.83 per dollar, according to data compiled by Bloomberg. It earlier reached 1,119.78, the strongest level since Nov. 12. To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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