Dollar Trades Near Three-Month High Versus Yen Before U.S. Jobs
By David McIntyre and Stanley White
June 1 (Bloomberg) -- The dollar traded near the highest in more than three months against the yen before a U.S. government report that will probably show jobs growth accelerated in May.
Signs of a stronger labor market add to evidence the world's largest economy is rebounding from the slowest growth in more than four years. The dollar climbed the most last month versus the euro since February 2006 as reports showed gains in consumer confidence, housing and manufacturing.
``The U.S. dollar is going to get some strength out of this data,'' said Joanne Masters, a currency strategist at Macquarie Bank Ltd. in Sydney. ``Tonight will give us a better reading of how far sentiment has improved.''
The dollar traded at 121.83 yen at 7:39 a.m. in London from 121.73 yen late in New York yesterday, when it touched 121.98, the highest since Feb. 12. The dollar was at $1.3450 per euro from $1.3453, rebounding from an all-time low of $1.3681 set April 27.
The U.S. currency gained 1.8 percent against the yen and 1.5 percent versus the euro in May as the odds of a Federal Reserve interest-rate cut over the next year slid to 27 percent from 47 percent a month ago, according to an index calculated by Credit Suisse, based on trading in interest-rate swaps.
U.S. employers added 132,000 to their payrolls last month, compared with 88,000 in April, according to the median forecast of 84 economists surveyed by Bloomberg News. The Labor Department report is due at 8:30 a.m. in Washington.
Revised data yesterday showed the U.S. economy grew last quarter at a 0.6 percent annual pace as housing slumped and companies reduced inventories.
15-Year Lows
Japan's currency slid to the lowest in more than 15-years against the Australian and New Zealand dollars on speculation investors will increase yen loans to fund purchases of higher- yielding assets, known as the carry trade.
Against the Australian dollar, the yen fell to 101.19, the lowest since April 1992, and dropped to 90.37 against New Zealand's, the weakest since August 1990. Interest rates in both countries are at least 5.75 percentage points higher than in Japan.
Foreign banks sent a record 21.9 trillion yen ($180 billion) overseas through their Japanese branches as of March 31, an increase of 30 percent from a year earlier, the Nikkei newspaper reported today, citing the Bank of Japan.
``In the year to the end of March, Japan had a record current-account surplus of around 22 trillion yen,'' said Robert Rennie, chief currency strategist at Westpac Banking Corp. in Sydney. ``By recycling this cash back into financial markets to fund the carry trade, Japan has been able to avoid a significant strengthening in the yen.''
Vigilant on Inflation
The euro may gain on speculation the European Central Bank next week will raise interest rates and signal more in the second half of the year to stem inflation.
The ECB will increase rates by a quarter-percentage point to 4 percent when it meets June 6, according to a Bloomberg survey. Since the central bank started raising borrowing costs in December 2005, the euro has gained 14 percent against the dollar and 15 percent against the yen.
ECB President Jean-Claude Trichet is scheduled to speak at 10:30 a.m. in Ankara today to mark the 75th anniversary of the Central Bank of Turkey. Trichet in the past has used the expression ``strong vigilance'' to signal rate increases.
``We might see a test of the upside leading into the interest-rate decision,'' said Tobias Davis, senior currency dealer at Custom House Global Foreign Exchange in Sydney. ``Trichet has always remained vigilant on inflation. We're expecting, at the least, a rate hike next week.''
Dollar gains may accelerate should it break through 122 yen, where traders have orders to buy, said Yuji Saito, head of the foreign-exchange sales department at Societe Generale SA in Tokyo. Traders sometimes place orders to limit losses in case bets go the wrong way.
``Depending on how strong the U.S. jobs data are, the dollar-yen could rise as high as 122.50 today,'' Saito said.
By David McIntyre and Stanley White
June 1 (Bloomberg) -- The dollar traded near the highest in more than three months against the yen before a U.S. government report that will probably show jobs growth accelerated in May.
Signs of a stronger labor market add to evidence the world's largest economy is rebounding from the slowest growth in more than four years. The dollar climbed the most last month versus the euro since February 2006 as reports showed gains in consumer confidence, housing and manufacturing.
``The U.S. dollar is going to get some strength out of this data,'' said Joanne Masters, a currency strategist at Macquarie Bank Ltd. in Sydney. ``Tonight will give us a better reading of how far sentiment has improved.''
The dollar traded at 121.83 yen at 7:39 a.m. in London from 121.73 yen late in New York yesterday, when it touched 121.98, the highest since Feb. 12. The dollar was at $1.3450 per euro from $1.3453, rebounding from an all-time low of $1.3681 set April 27.
The U.S. currency gained 1.8 percent against the yen and 1.5 percent versus the euro in May as the odds of a Federal Reserve interest-rate cut over the next year slid to 27 percent from 47 percent a month ago, according to an index calculated by Credit Suisse, based on trading in interest-rate swaps.
U.S. employers added 132,000 to their payrolls last month, compared with 88,000 in April, according to the median forecast of 84 economists surveyed by Bloomberg News. The Labor Department report is due at 8:30 a.m. in Washington.
Revised data yesterday showed the U.S. economy grew last quarter at a 0.6 percent annual pace as housing slumped and companies reduced inventories.
15-Year Lows
Japan's currency slid to the lowest in more than 15-years against the Australian and New Zealand dollars on speculation investors will increase yen loans to fund purchases of higher- yielding assets, known as the carry trade.
Against the Australian dollar, the yen fell to 101.19, the lowest since April 1992, and dropped to 90.37 against New Zealand's, the weakest since August 1990. Interest rates in both countries are at least 5.75 percentage points higher than in Japan.
Foreign banks sent a record 21.9 trillion yen ($180 billion) overseas through their Japanese branches as of March 31, an increase of 30 percent from a year earlier, the Nikkei newspaper reported today, citing the Bank of Japan.
``In the year to the end of March, Japan had a record current-account surplus of around 22 trillion yen,'' said Robert Rennie, chief currency strategist at Westpac Banking Corp. in Sydney. ``By recycling this cash back into financial markets to fund the carry trade, Japan has been able to avoid a significant strengthening in the yen.''
Vigilant on Inflation
The euro may gain on speculation the European Central Bank next week will raise interest rates and signal more in the second half of the year to stem inflation.
The ECB will increase rates by a quarter-percentage point to 4 percent when it meets June 6, according to a Bloomberg survey. Since the central bank started raising borrowing costs in December 2005, the euro has gained 14 percent against the dollar and 15 percent against the yen.
ECB President Jean-Claude Trichet is scheduled to speak at 10:30 a.m. in Ankara today to mark the 75th anniversary of the Central Bank of Turkey. Trichet in the past has used the expression ``strong vigilance'' to signal rate increases.
``We might see a test of the upside leading into the interest-rate decision,'' said Tobias Davis, senior currency dealer at Custom House Global Foreign Exchange in Sydney. ``Trichet has always remained vigilant on inflation. We're expecting, at the least, a rate hike next week.''
Dollar gains may accelerate should it break through 122 yen, where traders have orders to buy, said Yuji Saito, head of the foreign-exchange sales department at Societe Generale SA in Tokyo. Traders sometimes place orders to limit losses in case bets go the wrong way.
``Depending on how strong the U.S. jobs data are, the dollar-yen could rise as high as 122.50 today,'' Saito said.
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