Dollar Trades Near Week High Before U.S. Data on Jobs, Services

The dollar traded near a one-week high against the yen before U.S. reports on jobs and services industries that may add to evidence a recovery in the world’s largest economy is building momentum. Photographer: Tomohiro Ohsumi/Bloomberg

 

Play Video

Jan. 4 (Bloomberg) -- Kit Juckes, head of foreign-exchange research at Societe Generale SA, talks about the outlook for the euro and the dollar. Speaking with Maryam Nemazee on Bloomberg Television's "Countdown," Juckes also discusses Chinese inflation. (Source: Bloomberg)

 

Play Video

Jan. 4 (Bloomberg) -- Daniel Cook, chief executive officer of IG Markets Ltd., talks about the rise in retail investors trading currencies. Cook also discusses IG Markets' foreign-exchange trading services. He talks with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)The euro fell for a third day against the dollar on concern thatEurope’s debt crisis will persist, making it difficult for governments to raise funds.

The region’s currency declined for a second day versus the yen before Portugal sells six-month bills and Poland sells two- year and five-year bonds today. Declines in asking prices for Irish homes accelerated in the fourth quarter of 2010, property website Daft.ie reported today. The dollar traded near a one- week high against the yen before a U.S. report that may show services industries grew at the fastest pace in 4 1/2 years, providing more evidence the world’s largest economy is improving.

“Financing problems in Europe are still strong and sovereign debt woes are likely to continue this year,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “The bias is for the euro to be sold.”

The euro dropped to $1.3281 as of 11:38 a.m. in Tokyo from $1.3308 in New York yesterday, when it touched $1.3433, the highest level since Dec. 14. The single currency fell to 109.05 yen from 109.17 yesterday, when it reached 110.24, the strongest since Dec. 21. The dollar was at 82.11 yen from 82.04 yen yesterday, when it touched 82.28 yen, the most since Dec. 29.

Portugal, Poland Auctions

Europe’s currency extended last year’s 6.5 percent loss into 2011. Portugal will today be the first of Europe’s high- deficit nations to test investor demand this year after the threat of default forced Greece and Ireland to seek bailouts in 2010. The government debt agency plans to auction 500 million euros ($665 million) of bills repayable in July.

Poland may sell as much as 6.5 billion zloty ($2.2 billion) of January 2013 and April 2016 bonds, according to the Finance Ministry. The two-year yield is likely to be at least 4.9 percent, the highest level since an auction in February, and the five-year debt will yield at least 5.6 percent, the most since December 2009, according to analysts at PKO Bank Polski SA, ING Bank Slaski SA and Bank Handlowy SA, and data compiled by Bloomberg.

Average prices for Irish homes declined 4.8 percent to 220,000 euros in the fourth quarter, the biggest drop since the last quarter of 2009, after a 3.7 percent slip in the previous three months, Dublin-based Daft said in a report today. Prices have dropped 40 percent from a peak of more than 365,000 euros in mid-2007, it said.

The greenback strengthened versus all of its 16 major counterparts on speculation another U.S. report will show companies added the most jobs in three years, burnishing the appeal of U.S. assets.

‘Bolstering Optimism’

“A string of upbeat economic news is bolstering optimism about the U.S. recovery,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “This is contributing to a firmer dollar.”

U.S. employment rose by 100,000 in December, the most since November 2007, according to a Bloomberg survey of economists before the ADP Employer Services report today. The Institute for Supply Management’s non-manufacturing index, which covers about 90 percent of the economy, rose to 55.7 in December, the highest since May 2006, another survey showed before today’s data. A reading higher than 50 signals growth.

The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro and the yen, rose 0.2 percent to 79.558.

South Korea’s won fell the most in two weeks as overseas investors sold more local shares than they bought for the first time in three days and signs of a recovery in the U.S. economy eroded the yield advantage of the nation’s assets.

Difference in Yields

The difference in yields between South Korea’s five-year bonds and similar-maturity notes in the U.S. has shrunk to 218 basis points from a high of 302 basis points on Nov. 11, according to data compiled by Bloomberg. Data released yesterday by the U.S. Commerce Department showed factory orders rose unexpectedly in November.

“An improving U.S. economy and a stronger dollar may prompt investors to turn their attention away from Korea and to developed nations,” said Yun Se Min , a currency trader at Busan Bank in Seoul. “That can limit flows, but Korea’s economy is still one of the most promising in the emerging markets so I think we will see continual flows from overseas this year.”

The won slid 0.3 percent to 1,124.64 per dollar, according to data compiled by Bloomberg. The daily drop was the largest since Dec. 21.

To contact the reporters 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