Sun, Oct 05, 2014 - Page 15 News List

US dollar extends rally on policy gap with Europe

Bloomberg

The Bloomberg Dollar Spot Index gained for a seventh week, the longest rally in four years, as US jobs gains fueled a widening gap between the US Federal Reserve moving toward higher interest rates and further stimulus in Europe and Japan.

The US currency climbed against all of its 16 major counterparts after data showed US employers added more workers than forecast last month and the unemployment rate fell to the lowest since 2008. The euro fell to a two-year low, as European Central Bank (ECB) President Mario Draghi held interest rates at a record low. The pound slipped below US$1.60 for the first time in almost a year. The yen dropped an eighth week before the Bank of Japan’s policy meeting on Tuesday.

“The Fed’s going to like the unemployment rate,” said Roger Bayston, senior vice president and director of fixed income at the Franklin Templeton fixed-income group in San Mateo, California, in a phone interview on Friday. “With the Fed getting closer to raising rates versus the Bank of Japan and the ECB, the [US] dollar should be much stronger versus the yen and the euro.”

The Bloomberg Dollar Spot Index rose 1.1 percent to 1,078.65 this week in New York, the highest on a closing basis since June 2010. The seven-week rally was the first since June 2010.

The euro slumped 1.3 percent to 1.2516, dropping the most since the week ended on Sept. 5, and touched a two-year low of US$1.2501. The yen lost 0.4 percent to ¥109.76 after touching ¥110.09 on Wednesday, the weakest since August 2008. The yen strengthened 0.9 percent to ¥137.36 versus the 18-member common currency.

The Russian ruble led 29 of the US dollar’s 31 major peers lower this week, dropping 1.9 percent to stretch its loss this year to 18 percent, the most among majors after the Argentine peso’s 23 percent slide. Brazil’s real slumped 1.6 percent before presidential voting begins tomorrow.

Chile’s peso and the Malaysian ringgit were the only major currencies to advance versus the US dollar, adding 0.2 percent and 0.1 percent.

The pound slid 1.8 percent to US$1.5960 at 5pm in London on Friday, falling the most in a week since the five days ended on July 5 last year. It depreciated 0.4 percent to £0.7842 per euro.

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