Dollar Trades Near 8-Month Low on Fed Bets Before Jobs Report
NEW YORK (Oct 21) The dollar traded near the weakest since February against major counterparts before data forecast to show the U.S. unemployment rate held above the 6.5 percent threshold for the Federal Reserve to start tapering stimulus.
The greenback held the biggest five-day drop in six weeks versus its Australian counterpart as gains in global equities boosted risk appetite and economists in a Bloomberg News survey forecast the Fed won’t start slowing bond purchases until March. The 17-nation euro was 0.1 percent from the highest in more than eight months before a report this week which may show the region’s consumer confidence was the highest since July 2011.
“It’s hard to construct a bullish U.S. dollar scenario,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “The outlook is certainly for the Fed to be very generous in its monetary settings for probably longer than the market is thinking.”
The Bloomberg U.S. Dollar Index, which monitors the greenback against 10 other major currencies, was little changed at 1,002.79 at 8:31 a.m. in Tokyo from last week, when it slumped 1 percent, the most since the five days ended Sept. 20. It fell to 1,002.65 on Oct. 17, the lowest close since Feb. 19.
The euro traded at $1.3682 from $1.3687 on Oct. 18, when it touched $1.3704, the highest since Feb. 1. The 17-nation shared currency added 0.1 percent to 133.92 yen.
The greenback fetched 97.88 yen from 97.72 at the end of last week, when it capped a 0.9 percent decline, the biggest since the period ended Sept. 27. The Aussie dollar bought 96.65 U.S. cents from 96.77 on Oct. 18. It climbed 2.2 percent last week, the biggest jump since the five days ended Sept. 6.
The MSCI World Index of stocks gained 0.7 percent at the end of last week.
Fed Bets
The Fed buys $85 billion of bonds a month to put pressure on long-term borrowing rates and spur growth. Policy makers unexpectedly refrained from reducing purchases last month, saying they wanted more evidence of an economic recovery.
The central bank will delay the first cut to its buying until March, according to the median estimate of 40 economists surveyed by Bloomberg News Oct. 17-18. A poll last month forecast the first reduction would be in December.
Fed policy makers had pledged since December they won’t consider raising the interest rate as long as unemployment exceeds 6.5 percent. The jobless rate held at 7.3 percent last month, economists in a Bloomberg poll projected before the Labor Department data on Oct. 22. The release was postponed from Oct. 4 because of the government shutdown.
Economists in a separate Bloomberg survey estimate nonfarm payrolls increased by 180,000 workers last month.
In Europe, an index of consumer sentiment rose to minus 14.5 this month, the highest since July 2011, the median forecast of economists surveyed by Bloomberg showed before the European Commission data on Oct. 23.
