The US dollar was set for its biggest monthly gain in more than two years on Friday as reports showing a stronger US economy added to bets that the US Federal Reserve will boost interest rates sooner than its peers in Europe and Japan.
The greenback rose to the strongest level in 22 months versus the euro before the European Central Bank meets on Thursday to discuss the region’s slumping economy.
The yen neared the weakest level in six years amid slowing inflation and mixed signals on the speed of pension fund changes. Emerging market currencies headed lower, while the Bloomberg Dollar Spot Index reached its highest since 2010.
The gauge has gained 3.7 percent to 1,067.29 this month in New York, the highest on a closing basis since June 2010. The monthly gain would be the biggest since May 2012. The index this week posted its sixth straight weekly gain.
The greenback appreciated 1.1 percent this week to US$1.2684 per euro, touching US$1.2677, the strongest level since November 2012. The yen declined 0.2 percent to ¥109.29 per US dollar after touching ¥109.46 on Sept. 19, the weakest level since August 2008, but 0.8 percent to ¥138.63 per euro.
The yen fell as Japanese Minister of Health Yasuhisa Shiozaki, whose ministry oversees the Government Pension Investment Fund, said pension reform would go ahead.
Shiozaki said at a briefing in Tokyo on Friday that there is no plan to postpone a law change that would improve governance of the Government Pension Investment Fund. A review of asset allocation may see it increase riskier investments, including foreign stocks and debt.
The Bank of Japan, which meets on Oct. 7, is trying to boost inflation to 2 percent by pumping ¥60 trillion (US$550 billion) to ¥70 trillion a year into the economy.
The euro fell this week after Germany’s Ifo institute said its business climate gauge slid to 104.7 this month, the lowest since April last year, from 106.3 last year.
The report followed purchasing managers’ indices that showed growth in eurozone manufacturing and services slowed this month.
In London, the pound gained for a second week versus the euro to its strongest level in two years as the Bank of England moves toward raising interest rates, amid slower growth in the eurozone, where stimulus is being expanded.
Sterling advanced against most of its 16 major peers after Bank of England Governor Mark Carney said the point where interest rates “begin to normalize is getting closer.”
It weakened versus the greenback as bets that the Fed will raise rates next year boosted demand for the US currency.
Sterling appreciated 0.9 percent this week to £0.7808 per euro at 5:05pm London time on Friday and fell 0.2 percent to US$1.6260.
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