Sun, Nov 08, 2015 - Page 15 News List

US dollar surges after US jobs report

‘LIVE POSSIBILITY’:A ‘very impressive’ jobs report bolstered the chances of a Fed rate hike next month, boosting the dollar 1.3% against the euro and 1.1% against the yen

Bloomberg

The US dollar soared after a surge in US hiring bolstered the case for the US Federal Reserve to raise interest rates next month.

The currency advanced to its strongest since April versus the euro and its highest in more than two months versus the yen after a US Department of Labor report showed the US added the most workers in almost a year last month, beating all forecasts.

Bloomberg’s gauge of the greenback advanced to its highest in data going back to December 2004 as traders boosted bets that the Fed will raise rates next month.

The gains came after Fed Chair Janet Yellen this week said that a rate increase next month is a “live possibility” if economic data hold up. That contrasts with global policymakers confronting slow growth and lackluster inflation.

European Central Bank (ECB) President Mario Draghi reiterated this week that the ECB will consider further stimulus at next month’s meeting, and Bank of England Governor Mark Carney on Thursday cited a weakened global outlook in keeping UK rates at record-low levels.

“Very impressive,” New York-based Mizuho Financial Group Inc head of US corporate foreign-exchange sales Fabian Eliasson said of the US jobs report. “This obviously supports a sooner-rather-than-later rate hike, and that would obviously be very supportive of the dollar.”

The greenback strengthened 1.3 percent to US$1.0741 per euro as of 5pm in New York, the highest since April 22. It added 1.1 percent to ¥123.13.

The Bloomberg Dollar Spot Index rose 1.1 percent to 1,232.53, after touching 1,234.26. The dollar gained against all 10 of its Group-of-10 peers, and it added more than 1.9 percent versus the Turkish lira and the South African rand.

There is a 68 percent probability that the central bank will raise its benchmark rate at its December meeting, according to futures data compiled by Bloomberg, up from 56 percent before the report’s release. The calculation assumes the effective fed funds rate averages 0.375 percent after the first increase.

Labor Department data showed US payrolls increased by 271,000 in October, versus estimates for a gain of 185,000 in a Bloomberg survey of economists. The jobless rate fell to 5 percent, the lowest since April 2008, while average hourly earnings climbed from a year earlier by the most since July 2009.

The US dollar rose against the New Taiwan dollar Friday, gaining NT$0.012 to close at NT$32.73 amid caution as traders waited for the US job data, dealers said.

Turnover totaled US$1.076 billion during the trading session.

The yuan in Hong Kong posted the biggest weekly drop since its August devaluation on signs China’s economic growth remains weak and on prospects the US will increase interest rates as early as next month.

Manufacturing in the world’s second-largest economy contracted for a third month in October, official data showed on Sunday last week. Exports probably fell for a fourth month, while imports extended the longest stretch of declines in six years, according to analysts’ estimates in a Bloomberg survey before data due Nov. 8. The freely traded yuan dropped 0.8 percent this week to 6.3731 a dollar as of 4:36pm in Hong Kong, data compiled by Bloomberg show. That was the most since the period ended Aug. 14.

It was steady on Friday. The rate in Shanghai, which is allowed to diverge a maximum 2 percent from the central bank’s fixing, fell 0.56 percent from Oct. 30 and slipped 0.1 percent on Friday to close at 6.3530, according to China Foreign Exchange Trade System prices.

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