Dollar Extends Surge on Payrolls as Asian Futures Climb

New York (Dec 7)  The dollar extended gains against major peers, climbing to its strongest level since July 2007 versus the yen after a surge in payrolls bolstered the outlook for U.S. interest-rate increases. Asian index futures paced gains in U.S. stocks at the end of last week, as crude oil slid.

The greenback strengthened 0.2 percent to 121.75 yen by 7:50 a.m. in Tokyo, reaching as high as 121.77. The NZX 50 Index (NZSE50FG), the first major stock gauge to open in the Asia-Pacific region, fell 0.1 percent in Wellington. Nikkei 225 Stock Average futures climbed in Osaka and Chicago after the Standard & Poor’s 500 Index rose 0.2 percent to a record, while Treasuries retreated. Gold was little changed at $1,191.45 an ounce after slipping 1.1 percent Dec. 5, when U.S. oil dropped 1.5 percent.

U.S. employers added 321,000 workers to nonfarm payrolls last month, beating all projections in a Bloomberg survey of economists amid gains in hiring across the board. While the American recovery gathers pace, signs of slowdown are being embedded elsewhere. A report Dec. 5 showed euro-area investment fell last quarter, while data today is expected to confirm Japan’s economy continued to shrink in the three months to the end of September. China posts November trade data today.

“The yen bore the brunt of the dollar’s strength as the data brought into sharp focus the opposing future trajectories for monetary policy in Japan and the U.S.,” Kymberly Martin, a markets strategist in Wellington at Bank of New Zealand Ltd., wrote in an e-mail to clients, referring to the payrolls report. “We expect the Fed to begin to raise rates mid next year.”

Dollar Index

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, climbed 0.9 percent Dec. 5 to close at its highest level since March 2009. The euro slid 0.8 percent to the lowest level since 2012, while the yen lost 1.4 percent, the biggest one-day drop since Nov. 3.

Australia’s dollar fell for an eighth straight day today, losing 0.1 percent to 8309 U.S. cents, and touching 82.90, the weakest level since June 2010. New Zealand’s dollar slipped 0.2 percent to 76.93 U.S. cents. A government report today showed manufacturing volumes in the country rose 0.4 percent last quarter, after falling in the previous three months.

Commonwealth Bank of Australia and its three main competitors may need as much as A$30 billion ($25 billion) after a government-commissioned inquiry called for “unquestionably strong” capital levels, according to analysts.

Risk Report

The shortfall is based on lenders needing to boost levels to within the top quartile of their global peers and set aside additional funds against potential losses on home mortgages, as recommended by the Financial System Inquiry report released yesterday in Sydney by Australian Treasurer Joe Hockey.

Nikkei 225 futures jumped 1 percent to 18,045 on the Chicago Mercantile Exchange Dec. 5, while contracts traded in Osaka gained 0.8 percent to 18,090 by 3 a.m. Dec. 6. The index advanced 2.6 percent last week as the yen slumped 2.3 percent in its seventh straight weekly retreat. The MSCI Asia Pacific Index (MXAP) fell 0.5 percent in the five days to Dec. 5, while the S&P 500 added 0.4 percent to a record 2,075.37.

Japan’s economy, the second-largest in Asia, shrank an annualized 0.5 percent in the third quarter, according to the median estimate of 24 economists surveyed by Bloomberg before today’s final data reading. A previous report showed a contraction of 1.6 percent in the three months to Sept. 30. Gross domestic product dropped 7.3 percent in the second quarter, the most since 2009.

Japan Election

Prime Minister Shinzo Abe has called an election for Dec. 14, with a series of media polls showing his ruling coalition will probably retain its two-thirds majority in the lower house of parliament. Abe is seeking more time to implement his policies of unprecedented monetary easing and structural reform. Japan also updates on its current account and trade balances today.

Futures on Australia’s S&P/ASX 200 Index (AS51) gained 0.5 percent in most recent trading, as contracts on the Kospi index in Seoul added 0.1 percent. Hang Seng Index futures were up 0.2 percent with contracts on the Hang Seng China Enterprises Index. The measure of mainland Chinese stocks listed in Hong Kong jumped 4.1 percent last week to the highest level since February 2013.

China may report an 8 percent increase in exports for November and a 3.8 percent climb in imports, according to economists surveyed by Bloomberg. That would be a drop from 11.6 percent export growth in October and a 4.6 percent advance for imports. The Bloomberg China-US Equity Index of the most-traded Chinese stocks in New York rose 0.9 percent Dec. 5.

Philippines Closed

Markets in the Philippines are shut today as Typhoon Hagupit slammed central areas of the Southeast Asian country. Schools in the area and metropolitan Manila will be closed today as the storm moves toward the capital.

The Dow Jones Industrial Average ended Dec. 5 up 0.3 percent at an all-time high of 17,958.79. JPMorgan Chase & Co. rallied 2.2 percent to lead financial shares higher.

The median estimate in a Bloomberg survey was for a 230,000 increase in November payrolls, with the highest projection 306,000. November marked the 10th straight month that employment has risen by at least 200,000, the longest such stretch since the 19 months the ended in March 1995. The U.S. jobless rate held at a six-year low of 5.8 percent.

“It was an amazing jobs report, with gains across every sector,” Joe “JJ” Kinahan, chief strategist at TD Ameritrade Holding Corp., said by phone Dec. 5. The firm manages about $653 billion in client assets. “It really was a number that Wall Street wasn’t prepared for.”

Treasuries Slump

Yields on 10-year Treasuries jumped seven basis points, or 0.07 percentage point, to 2.31 percent to cap an increase in the week of 14 basis points. That marked the worst week for the benchmark notes since the five days to Sept. 12. Rates on similar-maturity Australian bonds added two basis points in early trading today, to 3.06 percent.

West Texas Intermediate crude slipped to $65.84 a barrel Dec. 5, capping a weekly loss of 0.5 percent. Brent oil in London lost 0.8 percent to $69.07 per barrel, with both oil blends at their lowest prices since 2009.

Saudi Arabia offered customers in Asia the lowest discounts in at least 14 years on its crude last week, bolstering speculation that the OPEC member is defending its market share. Oil slumped 18 percent last month as the Organization of Petroleum Exporting Countries maintained its output quota, signaling it will probably allow prices to fall to a level that may slow U.S. production.

Source: Bloomberg