Bloomberg News

Dollar Rises to 15-Month High Versus Euro Amid Job Gains, Crisis

January 09, 2012

Jan. 6 (Bloomberg) -- The dollar strengthened to the highest level in 15 months versus the euro as U.S. employers added more jobs than forecast and investors speculated Europe’s sovereign-debt crisis is worsening.

The greenback gained for a fifth week versus the euro in its longest winning streak since February 2010 amid optimism the U.S. economic recovery is building momentum. The euro fell against most major peers, reaching an 11-year low against the yen. Mexico’s peso rose against all of its most-traded counterparts.

“The euro is decoupling from the risk-on, risk-off trade,” said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. “We’ve seen strong U.S. data helping the euro over the past two years via risk appetite, and that is changing as a strong report like this sees the euro falling versus the dollar. This is going to be a theme that will play out in early 2012.”

The dollar appreciated 0.6 percent to $1.2717 per euro at 5 p.m. in New York. It touched $1.2698, its strongest level since Sept. 13, 2010, and rose 1.9 percent on the week. The U.S. currency slipped 0.2 percent to 76.97 yen after rising earlier as much as 0.3 percent. It was little changed on the week.

The euro declined 0.7 percent to 97.90 yen after falling earlier to 97.88 yen, the lowest level since December 2000.

It was the worst week for Europe’s common currency in four months. The euro lost 1.3 percent against nine developed-nation peers tracked by Bloomberg Correlation-Weighted Currency Indexes, the most since it dropped 1.9 percent in the five days ended Sept. 2.

Net Shorts

Futures traders increased their bets that the euro will decline against the dollar to a record high. The difference between wagers the shared currency would fall versus those that it would rise -- so-called net shorts -- surged to 138,909 in the week ended Jan. 3, according to the Commodity Futures Trading Commission.

Stocks retreated, with the MSCI World Index falling 0.5 percent and the Standard & Poor’s 500 Index losing 0.3 percent. The Thomson Reuters/Jefferies CRB Index of raw materials rose 0.5 percent and declined 0.3 percent.

“Caution is still the theme,” said Greg Anderson, a currency strategist at Citigroup Inc. in New York. “The solid jobs report was largely expected. That leaves room for other issues to take over and dominate markets.”

Government Help

The yen erased losses versus the dollar after Federal Reserve Bank of New York President William Dudley called on the U.S. government to try new programs to revive the housing market and said the central bank may still consider ways to spur growth. He spoke at an economic forum in Iselin, New Jersey.

The Fed purchased $2.3 trillion of Treasury and mortgage- related bonds from 2008 through June 2011 in two rounds of quantitative easing to support the economy.

Today’s payrolls data “should dull whatever is still being talked about in terms of quantitative easing,” said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. in New York. “As the U.S. economy strengthens, one would expect that to allay some of the fears surrounding global growth. The euro’s in a zone of its own at this point,” he said.

Dollar Index

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, rose 0.4 percent to 81.265.

The index may climb to a 17-month high, Gaitame.com Research Institute Ltd. said, citing trading patterns. The gauge surpassed the higher range of the so-called Bollinger band technical-analysis tool yesterday for the first time in three weeks. The Dollar Index may advance further, given that its 25- day moving average has risen since November, said Takuya Kawabata, a researcher in Tokyo. The next target will be 82.591, and it may rise to 83.559, the level reached in August 2010.

U.S. nonfarm payrolls increased by 200,000 jobs last month, following a revised 100,000 gain in November that was smaller than initially estimated, Labor Department data showed. The median forecast in a Bloomberg News survey was for a rise of 155,000. The unemployment rate unexpectedly fell to 8.5 percent, the lowest since February 2009.

The euro had its second weekly loss against the yen before the European Central Bank meets on Jan. 12. Policy makers have lowered the benchmark main refinancing rate to 1 percent since November, from 1.5 percent, to support the economy.

Japanese Finance Minister Jun Azumi said today he understands the weakening of the euro against the yen will have a significant impact on companies that export their goods to the region. Japan sold the yen three times last year as its strength threatened to derail an export-led recovery.

Peso, Rand

Mexico’s peso was the top performer among the dollar’s 16 most-traded counterparts tracked by Bloomberg. It appreciated 0.2 percent to 13.7350 to the greenback. South Africa’s rand gained as much as 0.8 percent to 8.1161 per dollar before trading little changed at 8.1779.

Canada’s dollar weakened versus most of its major peers after the nation’s employers added fewer jobs in December than forecast and the jobless rate rose for a third straight month. The currency declined 0.8 percent to C$1.0284 per U.S. dollar.

--With assistance from Keith Jenkins in London, Scott Lanman in Washington and Catarina Saraiva in New York. Editors: Greg Storey, Dave Liedtka

To contact the reporters on this story: Allison Bennett in New York at abennett23@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


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