Bloomberg News

Dollar Rises to Six-Month High Versus Yen on Employment Gains

November 02, 2012

The dollar advanced to a six-month high against the yen after the last jobs report before next week’s election showed hiring in the U.S. increased more than forecast.

The U.S. currency strengthened to a one-month high against the euro amid confirmation that the euro-zone’s manufacturing sector contracted in October. Japan’s currency declined for a third week against the dollar as economic weakness and disappointing corporate earnings spurred speculation the Bank of Japan (8301) will expand monetary stimulus. The Canadian and New Zealand dollars rose against most peers.

“It’s been clearly positive for the dollar against its fellow low-yielding core currencies, like the euro and the yen,” Richard Franulovich, a senior currency strategist at Westpac Banking Corp. (WBC) in New York, said in a telephone interview. “It’s also good news for global growth and commodity currencies.”

The greenback gained 0.4 percent to 80.43 yen at 5 p.m. in New York after touching 80.68, the highest level since April 27. It rose 0.8 percent to $1.2835 versus the shared European currency after touching $1.2821, the strongest since Oct. 1, as it crossed its 50-day and 200-day moving averages. The yen gained 0.5 percent to 103.24 per euro.

The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, climbed as much as 0.7 percent to 80.610, its highest level since Sept. 7.

Jobs Data

A net 171,000 workers were added to payrolls in October after a 148,000 gain the prior month that was more than first estimated, Labor Department figures showed today in Washington. The median forecast of 91 economists surveyed by Bloomberg called for an advance of 125,000. The jobless rate rose to 7.9 percent from 7.8 percent as more people entered the labor force.

The report is “indicative of a little bit stronger pulse in the labor market over the last couple of months,” Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York, said in a telephone interview. “It’s probably going to help sentiment in terms of risk-on.”

Canada’s dollar and the Mexican peso gained versus the majority their 16 most-traded counterparts after the better- than-forecast jobs data in the U.S., the largest trade partner for both nations.

The Canadian currency rose 0.1 percent to 99.58 cents per U.S. dollar. The peso declined 0.2 percent to 13.0367 per dollar.

Kiwi, Rand

The New Zealand dollar rose to a six-month high against Japan’s currency, reaching 66.78 before before increasing 0.2 percent to 66.36 yen. The so-called kiwi declined 0.2 percent to 82.52 per U.S. dollar.

South Africa’s rand declined the most in over a week on concern slowing growth will damp demand for the country’s assets. Unemployment in Africa’s biggest economy rose in the third quarter as mining companies eliminated jobs amid strikes.

The currency dropped 1.5 percent to 8.7700 per dollar after falling as much as 1.8 percent, its biggest decline since Oct. 23. It fell 0.6 percent to 11.2567 per euro.

With the presidential race four days away, a Washington Post/ABC News national tracking poll released yesterday showed President Barack Obama and Republican challenger Mitt Romney essentially tied, with 49 percent of likely voters supporting Obama and 48 percent with Romney.

Romney has said he disagrees with the Federal Reserve’s measures to stimulate the economy and would replace Chairman Ben S. Bernanke, who last week reaffirmed the central bank would purchase $40 billion of debt a month to depress borrowing costs and spur growth.

Fiscal Cliff

The next president will be faced with the so-called fiscal cliff, more than $600 billion of federal spending cuts and tax increases that will take effect at the start of next year unless Congress acts. JPMorgan Chase & Co., the largest U.S. bank by assets, said last month that the combination will subtract 1 percentage point from U.S. growth.

“The biggest risk to the fiscal cliff is that an outbreak of common sense turns it into a fiscal molehill, the economy does better than expected next year an the transatlantic economic divergence drives the euro down,” said Kit Juckes, the head of foreign-exchange research at Societe Generale SA in London.

Factories, Jobless

The U.S. currency rose yesterday against the euro and yen after the Institute for Supply Management’s factory index climbed to 51.7 last month, the highest since May, from 51.5 in September. Applications for jobless benefits fell 9,000 to 363,000 in the week ended Oct. 27, the fewest in three weeks, the Labor Department reported yesterday. Last week’s claims data had yet to be influenced by the fallout from Hurricane Sandy.

A gauge of manufacturing in the 17-nation euro area dropped to 45.4 from 46.1 in September, snapping two months of advances, London-based Markit Economics said today. That compares with an initial October estimate of 45.3 published on Oct. 24. A reading below 50 indicates contraction.

The euro has weakened 2.8 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The yen dropped 6.5 percent, the biggest loser, and the dollar slid 1.7 percent.

Commerzbank AG today raised its forecasts for the euro against the dollar through December 2013, saying weakness in the currency will be delayed.

The Frankfurt-based bank estimates the euro will trade at $1.30 by December this year, up from a previous forecast of $1.23, analysts Ulrich Leuchtmann and Ralph Solveen wrote in an e-mailed note. It will be at $1.23 by December 2013, from a previous estimate of $1.16, the analysts wrote.

To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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