Dollar Reaches One-Month High Versus Yen Before Jobs; Kiwi Falls

The dollar rose to a one-month high against the yen before reports this week that economists said will show U.S. employers added jobs last month, boosting speculation the Federal Reserve will keep cutting stimulus. 

The U.S. currency gained versus all except one of its 16 major counterparts after Treasury 10-year yields climbed to a three-week high yesterday, increasing their attraction. The euro was little changed as traders bet its recent weakness has factored in prospects the European Central Bank will boost monetary easing when it meets tomorrow. New Zealand’s currency fell for a third day as milk prices dropped. Australia’s dollar rose versus most major peers as economic growth quickened. 

“Dollar-yen has benefited from the bounce in U.S. Treasury yields,” said Callum Henderson, global head of foreign-exchange research at Standard Chartered Plc in Singapore. Further gains in the exchange rate “will depend largely on what happens to the back end of the U.S. Treasury curve,” he said, referring to yields on longer-maturity debt. 

The dollar rose 0.2 percent to 102.66 yen at 8:36 a.m. in London after advancing to 102.80, the highest level since May 2. The U.S. currency gained 0.1 percent to $1.3613 per euro after weakening 0.2 percent yesterday. The euro traded at 139.74 yen from 139.69 yesterday. 

U.S. companies hired 210,000 workers in May after adding 220,000 the previous month, according to a Bloomberg News survey of economists before ADP Research Institute releases the data today. The Labor Department will say on Friday that payrolls climbed 215,000 last month, a separate survey shows.

Treasury Yields

Treasury 10-year yields climbed to 2.60 percent yesterday, the highest since May 14, having increased 12 basis points in the previous two days. A basis point is 0.01 percentage point. 

The Fed will today release its Beige Book report, which looks at current economic conditions in each of its 12 districts. The survey will give the Federal Open Market Committee anecdotal information about the economy before it meets on June 17-18 to review monetary policy. The central bank is tapering bond purchases amid signs the economy is improving, having kept its benchmark interest rate close to zero since 2008. 

The dollar has appreciated 1.2 percent in the past month, the second-best performer of 10 developed-nation currencies tracked by Bloomberg Correlation Weighted Indexes. The yen advanced 0.7 percent, while the euro dropped 0.9 percent.

Draghi Options

Two euro-area central-bank officials said ECB President Mario Draghi will probably signal any interest-rate cut this week won’t be the last. He may reiterate his commitment to keeping borrowing costs at current or lower levels, they said, asking not to be identified because the talks aren’t public. Policy makers will cut the deposit rate to negative 0.1 percent from zero, according to 32 of 50 economists in a Bloomberg survey. 

Euro-area inflation slowed to an annualized 0.5 percent in May from 0.7 percent in April, the European Union’s statistics office said yesterday. The ECB’s goal is just below 2 percent. 

“It’ll be hard for Draghi to weaken the euro further at Thursday’s meeting,” Yujiro Goto, a currency strategist at Nomura International Plc in London, said yesterday. “A lot of additional easing is already priced in.” 

New Zealand’s dollar dropped to the lowest in three months as an index of whole milk powder prices fell 8.5 percent, extending their decline since a Feb. 5 auction to 28 percent. 

The kiwi depreciated 0.2 percent to 84.15 U.S. cents after falling to 84.02, the lowest level since March 6. The currency has slumped 1 percent this week. 

Australia’s dollar rose versus all except one of its 16 major peers after the statistics bureau said the economy expanded 1.1 percent in the first quarter, accelerating from a 0.8 percent pace in the previous period. 

“The GDP number was much better than expected,” Standard Chartered’s Henderson said. “We should see further upside in the Aussie near term.” 

The Aussie gained 0.2 percent to 95.17 yen and was little changed at 92.69 U.S. cents.

Courtesy: Garfield Reynolds via bloomberg

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