The Bloomberg Dollar Spot Index touched a four-month high as signs of improvement in the labor market support expectations the U.S. economy will be strong enough for the Federal Reserve to end bond purchases this year.
The dollar remained higher versus most major peers before government data today forecast show initial claims for unemployment benefits fell. A report tomorrow may say U.S. employers continued to add positions and the jobless rate remained at a five-year low. The pound traded near its strongest in a year against the euro before policy decisions by the European Central Bank and the Bank of England today. The Australian dollar fell for a third day.
“We’re positive on the U.S. dollar going forward,” said Peter Dragicevich, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation’s biggest lender. “If the U.S. economy continues to improve, asset purchases will be finished later this year.”
The Bloomberg Dollar Spot Index, which tracks the currency against 10 of its major counterparts, touched 1,030.18, the highest since Sept. 9.
The dollar bought 104.88 yen at 2:06 p.m. in Tokyo after climbing 0.6 percent over the previous two days. The greenback was at $1.3578 per euro, following a 0.3 percent advance yesterday to $1.3576. Europe’s shared currency traded at 142.44 yen from 142.35 in New York. It was little changed at 82.56 pence from 82.54, after touching 82.42 yesterday, the lowest since January 2013.
Initial jobless claims in the U.S. probably fell to 335,000 in the week through Jan. 4 from 339,000 in the previous period, according to the median estimate of economists surveyed by Bloomberg News before today’s Labor Department report.
Data tomorrow may show employers in the world’s biggest economy added 195,000 jobs last month after boosting positions by 203,000 in November, according to a separate poll. The unemployment rate probably held at 7 percent, the least since November 2008.
“Expectations of a better U.S. jobs figure are rising,” said Masato Yanagiya, the New York-based head of foreign exchange and money trading at Sumitomo Mitsui Banking Corp. “A good jobs report is more likely to drive dollar-yen higher.”
Minutes of the Fed’s December meeting released yesterday didn’t describe a set schedule for the pace of asset-purchase reductions after policy makers cut monthly purchases to $75 billion from $85 billion, citing improvement in the labor market.
Policy makers gather Jan. 28-29 to consider the next step in their strategy of gradually reducing the pace of purchases. They will trim buying in $10 billion increments over the next seven meetings before ending them in December, according to the median forecast in a Bloomberg survey on Dec. 19.
ECB officials meeting today will probably keep the benchmark at a record-low 0.25 percent, according to all 51 economists and analysts surveyed by Bloomberg. Policy makers at the BOE are likely to refrain from changing its 0.5 percent key rate, a separate poll showed.
European Commission figures this week showed inflation in the 18-nation euro area slowed toward a four-year low. House prices in the U.K. will extend their advance this year, mortgage lender Halifax said yesterday.
U.K. two-year government bonds offered 33 basis points, or 0.33 percentage point, more than their German counterparts yesterday. The gap widened to 39 basis points on Dec. 27, the biggest since January 2013.
“The yield differential between core Europe and the U.K. is becoming increasingly negative, and that’s helping to put downward pressure on euro-sterling,” CBA’s Dragicevich said.
The euro will probably fall to 81 pence by Dec. 31, according to the median estimate of economists surveyed by Bloomberg. The shared currency will weaken to $1.28 by then, a separate poll showed.
Japanese investors, who watched their nation’s current-account surplus help send the yen to a record two years ago, disagree and see the euro gaining this year. The broadest measure of Europe’s trade balance climbed to a record 21.8 billion euros ($29.6 billion) in October, echoing the surplus Japan enjoyed for almost three years from 2009.
“We’ll see a kind of deja-vu in the euro zone,” Akira Takei, the Tokyo-based head of international fixed-income at Mizuho, said in a phone interview yesterday. “The euro will be one of the strongest currencies in the world.”-Bloomberg
