Dollar Rises for Fourth Day on Fed Rate-Increase Bets

San Francisco (Sept 11)  A dollar gauge gained for a fourth day, the longest winning stretch since July, amid speculation the Federal Reserve will raise interest rates by the middle of next year.

The pound rose versus most major peers after a poll showed supporters of Scottish independence lost ground a week before a vote that could lead to the breakup of the U.K. Canada’s dollar dropped as oil, the nation’s biggest export, touched a 16-month low. The dollar slipped versus the euro after data showed the number of Americans filing for first-time jobless benefits unexpectedly climbed before the Fed meets next week.

“We’re going to have weekly variations, but the reality is the labor market has recovered,” Andrew Wilkinson, chief market analyst at Interactive Brokers LLC, said in a phone interview from Greenwich, Connecticut. “I very much doubt one granular piece of data is going to change anything.”

The Bloomberg Dollar Spot Index rose 0.1 percent to 1,048.59 at 2:19 p.m. New York time and reached 1,049.44. It touched 1,049.73 yesterday, the highest level since July 2013. The gauge fell briefly today after the U.S. employment data.

The dollar declined 0.1 percent to $1.2931 per euro. The U.S. currency gained on Sept. 9 to $1.2860, the strongest since July 2013. It was little changed at 106.92 yen after rising to 107.20, the highest since September 2008. The single currency rose 0.2 percent to 138.27 yen.

BNP Paribas SA cut its year-end euro forecast to $1.25, from $1.32, as the shared currency fell earlier after the European Central Bank said it will spur a slumping economy. The ECB cut interest rates last week and said it will purchase asset-backed securities.

Pound Gains

The pound advanced as a poll by Survation for the Daily Record newspaper in Glasgow on support for the Sept. 18 Scottish vote put the “no” lead at six percentage points when excluding undecided voters, with 47 percent support for the “yes” campaign and 53 percent opposed to independence. The results followed a survey by YouGov Plc last weekend that put the “yes” side ahead for the first time, sending the pound tumbling.

Sterling rose 0.1 percent to $1.6243 after adding 0.7 percent in the past two days. The U.K. currency slid to as low as $1.6052 yesterday, the least since November.

New Zealand’s currency fell versus most of its 31 major peers after the Reserve Bank of New Zealand kept its key rate at 3.5 percent, reiterating that the currency’s strength is “unjustified and unsustainable.” The central bank lowered its forecast for the 90-day bank bill rate, suggesting borrowing costs won’t rise again until the first or second quarter.

Maintain Pressure

“The market has a passion to push on the downside” for the New Zealand dollar, said Gavin Friend, a foreign-exchange strategist at National Australia Bank Ltd. in London. The central bank wants “to keep pressure on the kiwi. For currency investors, why would you want to buy the kiwi when you’re getting this kind of guidance?”

New Zealand’s dollar dropped 0.6 percent to 81.81 U.S. cents and reached 81.61 cents, the lowest since Feb. 4. The kiwi will weaken to 80 cents by year-end, Friend said.

The Canadian dollar sank to the weakest level since April as crude oil sank as much as 1.4 percent to $90.43 per barrel in New York, the lowest since May 2013, according to data compiled by Bloomberg.

The loonie, as the Canadian dollar is called for the image of the aquatic bird on the C$1 coin, depreciated 0.9 percent to C$1.1041 per U.S. dollar and reached C$1.1046, the weakest since April 25.

Diverging Policies

The currency has gained 2.4 percent in the past three months, the second-best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The greenback was the biggest winner, gaining 4.2 percent, while the euro weakened 0.9 percent and the yen fell 1 percent.

The yen reached the weakest level in almost six years against the dollar after Bank of Japan Governor Haruhiko Kuroda told Prime Minister Shinzo Abe today the central bank won’t hesitate to act if it risks missing its inflation target.

Both the government and the BOJ have signaled readiness to increase stimulus to offset any economic drag from a proposed increase in the consumption tax next year, which would be the second rise in the levy in 15 months.

Initial jobless claims in the U.S. climbed by 11,000 to 315,000 in the week ended Sept. 6, which included the Labor Day holiday, Labor Department data showed. It was the highest since June 28 and exceeded the Bloomberg survey median forecast of 300,000.

Fed Meeting

The Fed, which meets Sept. 16-17, is considering the timing of its first interest-rate increase since 2006 and whether to revamp its public guidance on the path of rates. The central bank has said since March rates would stay low for a “considerable time” after it completes monthly bond-buying intended to spur economic growth. Purchases are on track to end this year.

“The market position in dollar is very long -- if you do have a little bit of selloff, some long positions get squeezed out of the market,” Fabian Eliasson, who works in foreign-exchange sales at Mizuho Financial Group Inc. in New York, said by phone. “In the medium term, I don’t have any doubt the dollar will go higher. The Fed meeting really is the focus.” Long positions are bets a currency will gain.

There’s a 60 percent chance policy makers will raise the target interest trade to at least 0.5 percent by July 2015, futures trading shows. The likelihood was 52 percent at the end of August. The Fed has held the benchmark rate target in a range of zero to 0.25 percent since 2008 to support the economy.

Source: Bloomberg