Sun, Dec 06, 2015 page15

• Dollar rises as US job gains spur Fed liftoff speculation

  • Bloomberg
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  The US dollar rose on Friday, rebounding from Thursday’s selloff, after a US employment report bolstered speculation that the Federal Reserve would raise interest rates this month.

  The greenback advanced after a report showed US payrolls increased more than forecast. It extended gains after European Central Bank (ECB) President Mario Draghi said the bank could deploy more stimulus, if necessary. A gauge of the US currency has risen 8 percent this year, as the Fed signaled it was approaching liftoff, in contrast with easing by European policymakers and other central banks.

  “The dollar is trading stronger in reaction to the payrolls data as it gives more justification to a Fed December rate hike,” said Eimear Daly, a currency strategist at Standard Chartered PLC in London. “The dollar reaction is likely muted, however, as at this stage a December Fed move is almost a foregone conclusion.”

  The Bloomberg Dollar Spot Index rose 0.4 percent at 5pm in New York. The index tumbled 1.4 percent on Thursday. The greenback added 0.5 percent to US$1.0881 per euro and advanced 0.4 percent to ￥123.11.

  The dollar’s reaction to the jobs report was limited as investors nursed their wounds after an unexpected ECB outcome on Thursday caused the biggest decline in the US currency versus the euro in six years.

  “The November payrolls data was very solid, but the foreign-exchange market looks gun shy after an epic Thursday,” Alan Ruskin, global cohead of foreign-exchange research at Deutsche Bank AG in New York, said in an e-mail. “The data at least gives the dollar a fighting chance of more upside this year, but the price action is disappointing, most obviously on euro-dollar.”

  In Taipei, the US dollar fell against the local currency on Friday, shedding NTUS$0.113 to close at the day’s high of NTUS$32.822 after Draghi’s policy announcement, dealers said. The greenback was little changed from its closing of NT$32.815 on Nov. 27.

  Taiwan’s central bank jumped into the market on Friday, as it has done almost every session recently, to slow down the pace of the NT dollar’s appreciation for the sake of the country’s exports, they said.

  The losses incurred by the US dollar stopped a six-session gaining streak enjoyed by the currency.

  Meanwhile, pound bulls looking for a boost from the Bank of England’s (BOE) final meeting this year may be disappointed.

  After a week where the British currency fell to its lowest versus the US dollar in more than seven months and touched its weakest level against the euro since October, sterling is unlikely to see a significant rebound, said Lee Hardman, a London-based currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd.

  For most of this year, the pound has been caught between monetary policy expectations from the ECB on one side and the Fed on the other. In addition to that, UK economic data in recent weeks have signaled an uneven recovery, further cementing the view that the BOE might refrain from raising interest rates next year.

  “The pound has been trading on a softer footing in the near term,” Hardman said.

  Lowered expectations of BOE rate increases have “removed one key support factor for the pound in the near term, thus leaving it more vulnerable to the downside for now,” he said.

  Sterling declined 2.2 percent this week to ￡0.7207 per euro as of 5:28pm in London on Friday. It reached ￡0.7251 on Thursday, its weakest since Oct. 22. Sterling gained 0.4 percent to US$1.5093, after touching US$1.4895 on Wednesday, the least since April.

  Additional reporting by CNA
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