Dollar advances against euro and yen
Faster growth and inflation may bolster expectations the Federal Reserve will keep increasing interest rates to contain inflation as the US economy outpaces Europe’s for a fourth year. The dollar gained 4.6% versus the euro last quarter, the biggest gain since the first three months of 2001.
“The very strong rise in the prices-paid number is compounding worries about inflation,” said Mitul Kotecha, head of currency strategy in London at Calyon, a unit of Credit Agricole SA. “Interest rates have moved in the dollar’s favour in the past few months and it’s got some catching up to do.”
Against the euro, the dollar climbed to $1.2873 at 10.57am in New York yesterday, from $1.2964 late Thursday, according to electronic currency-trading system EBS.
It rose to 107.73 yen, from 107.15. Earlier, the dollar fell as low as $1.3060 per euro after the Labour Department said job growth last month was less than economists had forecast.
The yen began its decline earlier in Asia, after the Bank of Japan’s Tankan survey showed confidence among large manufacturers unexpectedly fell in March. The yen is heading for the third straight week of decline versus the dollar, and reached a five-month low of 107.79 yesterday. The Institute for Supply Management said yesterday its services index rose to 63.1. The ISM’s manufacturing prices index rose to 73 from 65.5. The institute initially reported the services index figure as the reading for the separate manufacturing index, which was 55.2 in March, from 55.3 in February.
US employers hired 110,000 workers last month, compared with the median forecast of 213,000.
“When you get such a big surprise as you did in the payrolls, it’s pretty unusual not to see the dollar sell off,” said Adarsh Sinha, a currency strategist at Barclays Capital in London.
