The yen rose against most of its major counterparts after the U.S. added the least jobs in a year last month, adding to concern global growth is stagnating.
The euro gained from a two-year low versus the dollar amid speculation its decline was too quick as Spanish bond yields fell for a second day. Japan’s currency rose to its strongest in almost four months against the dollar as the premium investors get for investing in U.S. debt over Japanese securities fell to a record.
“We have an expression on the trading floor that things can always get worse, and in this case they can’t,” said Michael Woolfolk, a managing director and senior currency strategist in New York at Bank of New York Mellon Corp. (BK:US), the world’s largest custodial bank. “We’ve hit a soft patch in U.S. economic activity. The U.S. dollar and Japanese yen have proved the preferred safe-haven currencies and the U.S. dollar is undoubtedly overbought.”
The yen rose 0.4 percent to 78.02 per dollar at 5 p.m. in New York after adding as much as 0.8 percent. It fell 0.2 percent 97.01 versus the euro after gaining as much as 1.3 percent. The euro added 0.6 percent to $1.2434.
Futures traders increased net bets against the euro versus the dollar to a record high for a third week. So-called net shorts rose by 8,054 to 203,415 contracts in the period ended May 29, Commodity Futures Trading Commission data showed today.
The euro rose against all its major counterparts as the 14- day relative strength index for the euro versus the dollar was below the 30 level, which signals an asset’s price may have fallen too quickly, for a ninth day, the longest streak since 2008.
“The market has gone quite far on this short-risk trade, so it’s running out of gas,” said Alan Ruskin, global head of Group-of-10 foreign-exchange strategy at Deutsche Bank AG in New York. “You’ve had a classic squeeze day. Now we’ve gotten to the point where growth is weak and could actually force the Fed into quantitative easing.”
The shared currency was also supported as 10-year Spanish yields fell three basis points to 6.53 percent. It is the first back-to-back daily gains for the benchmark note since May 4.
Credit Suisse lowered its three-month euro outlook to $1.19 from $1.25 and the 12-month forecast to $1.21 from $1.28, Peter Von Maydell, the London-based head of foreign-exchange strategy wrote to clients today.
“We have revised our FX forecasts to reflect further expected safe-haven flows into U.S. dollar assets over the next three months, particularly out of Europe and out of currencies linked to commodity prices and global growth expectations,” he wrote.
The Dollar Index fell for the first time in eight days after the May employment report spurred speculation the Federal Reserve may enact more monetary easing, known as quantitative easing, which may debase the currency.
The gauge, which tracks the greenback versus six major trading partners, declined 0.3 percent to 82.797. It is weighted 57.6 percent to movements in the euro.
Payrolls climbed by 69,000 last month, less than the most- pessimistic forecast in a Bloomberg News survey, after a revised 77,000 gain in April that was smaller than initially estimated, the Labor Department reported. The median estimate called for a 150,000 May advance. The jobless rate rose to 8.2 percent from 8.1 percent, while hours worked declined.
The difference, or spread, between the yield on 10-year Treasury notes and that of similar-maturity Japanese debt fell to the lowest level on record, according to Bloomberg data. The gap reached 59 basis points, or 0.59 percentage point, the narrowest since at least 1993 as the yield on the U.S. benchmark fell to a record 1.4387 percent.
The dollar gained 0.8 percent this week against nine developed-nation counterparts, according to the Bloomberg Correlation-Weighted Indexes. The yen has the biggest gain with a 3.2 percent advance and the pound had the largest decline at 1.3 percent.
Canada’s dollar sank to the lowest in more than six months versus the greenback after the nation’s gross domestic product grew 0.1 percent in March, Ottawa-based Statistics Canada said, less than the median economist forecast of 0.3 percent.
The so-called loonie fell 0.8 percent to C$1.0410. It earlier touched C$1.0443, the lowest since Nov. 28.
Westpac Banking Corp. (WBC) exited a wager that the Canadian dollar was going to rise against the euro after the loonie fell to $C1.2908 yesterday, wrote Richard Franulovich, a senior currency strategist at Westpac in New York.
Brazil’s real fell to a one-week low after a report showed the economy expanded 0.2 percent in the first quarter from the previous three months, compared with the 0.5 percent median forecast of economists surveyed by Bloomberg.
The real declined as much as 1.3 percent to 2.0499 per U.S. dollar.
To contact the reporters on this story: Allison Bennett in New York at firstname.lastname@example.org; Catarina Saraiva in New York at email@example.com
To contact the editor responsible for this story: Dave Liedtka at firstname.lastname@example.org