Bloomberg News

Dollar Drops Versus Yen as Data Show Mixed Results; Euro Falls

February 05, 2014

The dollar dropped to almost a three-month low against the yen as reports on company employment and service-industries growth showed mixed results, underscoring the economy’s uneven recovery.

The euro traded at almost a 10-week low versus Japan’s currency as retail sales in the region slumped and amid speculation the European Central Bank will hold down interest rates. Argentina’s peso gained the most among emerging-market currencies after the central bank placed limits on the amount of foreign currency commercial banks can hold. The U.S. nonfarm payrolls report is due Feb. 7.

The company-employment “number wasn’t dramatic on either side -- it really focuses the attention back on the jobs numbers,” said Chris Gaffney, co-chief investment officer at EverBank Wealth Management Inc., by phone from St. Louis. “The dollar has lost some of its safe-haven appeal. The economic numbers we’ve seen in 2014 are bringing investors back to a more realistic assessment of the economy.”

The dollar fell 0.2 percent to 101.45 yen at 5 p.m. New York time and touched 100.80. It fell to 100.78 on Feb. 3, the lowest since Nov. 21. Japan’s currency climbed 0.1 percent to 137.29 against the euro after appreciating to 136.23 yesterday, the strongest since Nov. 22. Europe’s common currency gained 0.1 percent to $1.3533.

The Bloomberg Dollar Spot Index decreased 0.1 percent to 1,026.45, falling for a third day. The index tracks the value of the greenback against its major peers, including the euro, the yen and the Canadian dollar.

Peso, Hryvnia

The peso rose on news Argentine banks must limit the holdings to 30 percent of assets and cut futures contracts in foreign currency to 10 percent of assets by April 30, the central bank said in a resolution published on its website.

Argentina’s currency gained 1.3 percent to 7.90 per dollar to trim its loss this year to 17 percent, the most among 173 global currencies.

The Ukrainian hryvnia swung between gains and losses after a Bloomberg survey of analysts showed Ukraine’s reserves probably slid to $18.8 billion in January from $20.4 billion a month earlier. That would tie November for the lowest level since 2006, before Russia pledged $15 billion in emergency loans a month later.

The hryvnia closed little changed at 8.775 per dollar after falling 3.6 percent the previous three days. It’s down 6.5 percent this year.

South Korea’s won advanced for a second day as the central bank reported today that the country’s foreign reserves rose to a record $348.4 billion last month. The currency gained 0.5 percent versus the dollar to 1,077.91 after rising 0.7 percent, the most since Jan. 29. It’s fallen 2.6 percent in 2014, the most among Asian currencies.

Growth Fears

“There is a fear that contagion from emerging markets may lead to a sharper hit to global growth, and that’s prompting investors to remain more risk averse,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The risk is that we continue to see some weakness in the U.S. data in the near term.”

Hardman said the dollar-yen exchange rate may fall further and test support at the 100 level. A support level is an area on a price graph where analysts expect buy orders to be clustered.

Economic Reports

The greenback briefly pared losses after the Institute for Supply Management’s non-manufacturing index increased to 54 from 53 in December, the Tempe, Arizona-based group said. Readings greater than 50 signal expansion.

The currency declined earlier as companies boosted payrolls by 175,000 in January, figures from the ADP Research Institute in Roseland, New Jersey, showed. The median projection of 40 economists surveyed by Bloomberg called for an advance of 185,000. Estimates ranged from gains of 125,000 to 241,000.

A report from the Labor Department on Feb. 7 is forecast to show nonfarm payrolls grew by 184,000, compared with a December increase of 74,000 that was the smallest since January 2011, while the unemployment rate remained at 6.7 percent.

“There was some concern going into today that there would be further weather issues, and that both these numbers could disappoint relative to consensus,” Brian Daingerfield, a Stamford, Connecticut-based currency strategist at Royal Bank of Scotland Group Plc, said in a phone interview. “ADP was a bit weaker than expected. Markets are now looking ahead to nonfarm payrolls.”

Euro Drops

The euro fell for the fifth time in six days versus the yen after the European statistics office in Luxembourg said retail sales in the region fell 1.6 percent in December from a revised 0.9 percent increase a month earlier. The median estimate of economists surveyed by Bloomberg was for a decline of 0.7 percent.

“Against the backdrop of a subdued euro area after the retail sales and ongoing equity-market uncertainty, euro-yen may well continue to probe the downside,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “We can maybe get all the way down to 135.”

The ECB will hold its benchmark interest rate at a record-low 0.25 percent tomorrow, according to economists surveyed by Bloomberg News, as it faces slowing inflation.

Traders’ expectations of future market swings fell for a third day. Deutsche Bank AG’s volatility index, based on option premiums on nine major currency pairs, dropped to as low as 8.07 percent.

To contact the reporters on this story: Joseph Ciolli in New York at jciolli@bloomberg.net; Andrea Wong in New York at awong268@bloomberg.net

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


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