The US dollar strengthened this week, touching a 10-month high against the yen, as better-than--forecast payrolls damped US Federal Reserve monetary stimulus speculation.
The euro fell for a second week against the dollar as Greece’s use of collective-action clauses forcing investors to take losses under the nation’s debt restructuring will trigger payouts on US$3 billion of default insurance. Mexico’s peso and Canada’s dollar rose against their 16 most-traded currencies amid stronger economic data for their biggest trading partner. The US Dollar Index reached a three-week high before the central bank holds a policy meeting tomorrow.
“The payrolls news sets the stage for the Fed finding it increasingly difficult to talk about further quantitative easing [QE],” said Shahab Jalinoos, a senior currency strategist in Stamford, Connecticut, for UBS AG.
“A trend of a stronger dollar seems to be establishing itself. The currencies that are bucking that trend seem to be the Mexican peso and Canadian dollar, which people see as better variations of the US dollar,” he added.
The dollar added 0.8 percent to close at ¥82.46 in New York, its fifth week of gains, the longest streak since March 2009. The euro fell 0.6 percent to US$1.3123, in its first back-to-back weekly loss since Jan. 13. The Japanese currency weakened 0.2 percent to ¥108.22 per euro.
Futures traders increased net bets that the euro would weaken against the dollar. Wagers the shared currency would fall against the greenback exceeded those that it would rise by 116,473 this week, figures from the Commodity Futures Trading Commission showed.
The euro reached a one-week high on Thursday amid speculation Greece had attracted enough public sector involvement to carry out its debt-swap. It weakened as a report showed the region’s economy contracted last quarter. Europe’s GDP shrank 0.3 percent from the third quarter, the region’s statistics office said on Tuesday.
The European Central Bank (ECB) kept its benchmark interest rate unchanged on Thursday and ECB President Mario Draghi said recent surveys showed signs of regional economic stabilization.
“Investor mindset is such that they’re just shunning European-denominated assets,” Samarjit Shankar, a managing director for the foreign-exchange group in Boston at Bank of New York Mellon Corp, said on Tuesday. “You see this spate of news flow coming out showing that leading policy makers around the world coming to terms with growth being at a premium.”
The US Dollar Index, which Intercontinental Exchange Inc uses to track the greenback against the currencies of six major US trading partners, advanced 0.6 percent to 79.959.
It touched 80.061, the highest since Feb. 16 as US nonfarm payrolls increased by 227,000 last month after rising by a revised 284,000 the prior month, data from the US Department of Labor showed on Friday. The unemployment rate held at a three-year low of 8.3 percent.
“If the data continue to improve, however gradually, the markets should begin preparing themselves for the good Dr Fed to wean them from their dependency rather than administer further dosage,” Federal Reserve Bank of Dallas President Richard Fisher said on Monday last week in a speech in Dallas.
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