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Dollar Near Two-Week High Versus Yen on Jobs Data; Euro Set for 5-Day Drop

By Ron Harui - Jan 7, 2011 12:59 PM GMT+0800

A one-euro coin arranged for a photograph in London. Photographer: Chris Ratcliffe/Bloomberg

 

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Jan. 5 (Bloomberg) -- John Taylor, chief executive officer of FX Concepts LLC, the world's largest currency hedge fund, talks about the outlook for the dollar and euro. Taylor, speaking with Carol Massar and Matt Miller on Bloomberg Television's "Street Smart," also discusses the Chilean peso and China's yuan. (Source: Bloomberg)

 

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Jan. 6 (Bloomberg) -- Axel Merk, president and chief investment officer at Merk Investments LLC, talks about the outlook for the euro and dollar. The dollar appreciated to a level stronger than $1.30 against the euro for the first time since early December before a report tomorrow forecast to show employers added jobs for a third month. The euro dropped below the 200-day moving average versus the dollar as the European Union discussed spreading the cost of bank failures. Merk speaks with Matt Miller and Carol Massar on Bloomberg Television's "Street Smart." (Source: Bloomberg)

The dollar traded near a two-week high against the yen before a U.S. report today which may show employers added jobs for a third month, supporting demand for assets in the world’s largest economy.

The euro headed for a weekly loss versus 14 of its 16 major counterparts on concern that European governments will struggle to raise funds as the region’s fiscal crisis lingers. The Australian dollar was close to a two-week low against its U.S. counterpart as worsening floods impaired the South Pacific nation’s coal industry.

“America’s economic outlook is getting more upbeat,” saidMarito Ueda, senior managing director at FX Prime Corp., a foreign-exchange margin company in Tokyo. “The dollar is likely to strengthen further.”

The dollar rose to 83.44 yen, the highest level since Dec. 23, before trading at 83.39 yen at 1:40 p.m. in Tokyo from 83.33 yen in New York yesterday. The euro fetched $1.2993 from $1.3003, after earlier falling to $1.2968, the weakest since Sept. 15. The single currency was at 108.33 yen from 108.35 yen.

Australia’s currency bought 99.30 U.S. cents from 99.44 cents yesterday, after declining to 99.20 cents, the least since Dec. 21. It was set for a 3 percent drop this week. The so- called Aussie was at 82.77 yen from 82.85 yen.

Economists are raising forecasts for the number of jobs added by U.S. employers in December after a report this week showed the biggest jump in company payrolls since records began in 2001.

Jobs Forecasts

The median forecast in a Bloomberg News survey calls for a 150,000 gain last month, ahead of today’s data from the Labor Department. That’s up from 135,000 before a Jan. 5 report from ADP Employer Services that showed companies added almost three times as many jobs as economists had forecast. The unemployment may have fallen to 9.7 percent in December from 9.8 percent the previous month.

“The dollar is the strongest among the Group of Three currencies,” said Koji Fukaya, chief currency strategist at Credit Suisse Group AG in Tokyo. “The dollar sell-off ended as the U.S. economic outlook brightened. We’ve seen a 180-degree change from last year.”

The dollar dropped 3.4 percent last year in a measure of the currencies of 10 developed nations, according to Bloomberg Correlation-Weighted Currency Indexes. The greenback has risen 2.3 percent since the end of 2010.

Europe’s common currency touched a three-month low versus its U.S. counterpart before Italy,Portugal and other European countries sell debt next week.

Europe’s Debt Sales

France auctions 8 billion euros ($10.4 billion) of 91-, 181-and 364-day bills on Jan. 10, Italy sells 7 billion euros of 367-day bills on Jan. 11 and Portugal offers 2014 and 2020 bonds on Jan. 12.

“There’s an increased focus on the sovereign-debt profile of the likes of Portugal and Spain,” said Alex Sinton, senior currency dealer at ANZ National Bank Ltd. in Auckland. “The euro is headed for the $1.2950 area.”

Borrowing costs for Portugal surged at a six-month bill sale this week, the first of Europe’s high-deficit nations to test investor demand in 2011 after the threat of default forced Greece and Ireland to seek bailouts last year. Spain and Italy together need to raise 317 billion euros this year, according to BNP Paribas SA. Portugal, which intends to sell as much as 20 billion euros in bonds to finance its budget and redemptions this year, sold 500 million euros of bills with a yield of 3.686 percent on Jan. 5, up from 2.045 percent at a sale of similar maturity securities in September.

Euro’s Survival

The euro’s survival in its present form “can no longer be taken for granted,” Thomas Mayer, chief economist of Deutsche Bank AG said, the London-based Times reported, citing an interview. Mayer said European Union policymakers have to move faster to reform the euro region to avoid its falling into another crisis, according to the newspaper.

Australia’s dollar was poised for its first weekly decline since Dec. 10 as record rainfall in Queensland spread floods across an area the size of France and Germany, disrupting coal mineand rail operations.

The flooding is “a very expensive problem,” said Kurt Magnus, executive director of foreign-exchange sales at Nomura Holdings Inc. in Sydney. “The Australian dollar is trapped between the U.S. dollar strength and a global economic recovery led by the U.S. The short-term risk for the Aussie is to go lower.”

Queensland coal exports may be cut by as much as 30 million metric tons if heavy rain and flooding continues across the state into February, the Australian newspaper reported today, citing a forecast from UBS AG. The loss in shipments may cost A$6 billion ($6 billion), the newspaper calculated, using government price forecasts. Australia is the world’s biggest coal exporter when supplies of coking coal to make steel and thermal coal to generate power are combined.

The flooding will cost the country’s economy about 0.4 percent of gross domestic product, Nomura’s Magnus said.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net