Mon, Jun 08, 2015 - Page 15 News List

US dollar likely to strengthen amid data on jobs, sales

Bloomberg

If the stellar US jobs report is any guide of economic strength last month, reports next week could provide more impetus for strength in the US dollar.

The US currency jumped to a 13-year high against the yen after a report on Friday showed payroll employment grew more than forecast last month and wages rose, bringing forward the chance of a US Federal Reserve interest-rate increase to September. Retail sales, producer prices and consumer sentiment in the US are forecast to also show increases before Fed policymakers are set to gather in less than two weeks.

“If we are going see another meaningful rally in the dollar, the main focus is really retail sales,” Boston-based Pioneer Investment Inc director of currency strategy Paresh Upadhyaya said by telephone. “Retail sales [had] been, to say the least, on the soggy side, and May should be a real clean read; we do not have any type of weather-related issues.”

The dollar advanced by 1.2 percent to ¥125.63 last week in New York trading and touched ¥125.86, the highest since June 2002.

The US currency fell by 1.2 percent to US$1.1114 per euro.

The Bloomberg Dollar Spot Index, which tracks the US currency against 10 major peers, added 0.1 percent to 1,192.75.

The US currency is up 5.4 percent this year, No. 2 after the Swiss franc among 10 developed nations, Bloomberg Correlation-Weighted Indices showed.

Hedge funds and other large speculators added to net futures positions that profit from the US dollar strengthening against the yen to the most since Jan. 13, US Commodity Futures Trading Commission data showed.

Economists in a Bloomberg survey predict that US retail sales rose 1.2 percent last month, while the US producer price index gained the most since 2012.

The University of Michigan’s index of sentiment rose this month based on a separate survey.

A higher appetite to spend and rising wholesale prices provide underlying potential for US consumer prices to rise toward the Fed’s 2 percent target, allowing Fed Chair Janet Yellen and her board to raise rates sooner.

“There is probably a mental high-fiving between Yellen and other Fed members,” Minh Trang, a senior foreign-exchange trader at Silicon Valley Bank in Santa Clara, California, said by telephone. “You can see the reaction was almost immediate with the dollar and other Group of 10 counterparts. [A] September rate hike is almost certain at this point.”

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