By Bo Nielsen and Ron Harui
Jan. 11 (Bloomberg) -- The dollar fell to a three-week low against the euro as traders pared bets that the Federal Reserve will bring forward interest rate increases after last week’s weaker-than-expected U.S. jobs report.
The dollar declined against 15 of the 16 most-traded currencies tracked by Bloomberg after Reserve Bank of St. Louis President James Bullard signaled rates may remain low for some time. The Australian dollar rose to the strongest level in five weeks versus the greenback after a Chinese report yesterday showed exports climbed for the first time in 14 months.
“The payrolls report doesn’t change the big picture of U.S. recovery, but it pushed out the start of Fed tightening, and that has made some people change their positions,” said Paul Robson, a London-based currency strategist at Royal Bank of Scotland Group Plc. “As long as the U.S. data doesn’t deteriorate sharply, risk appetite will do fine and we’ll see a generally weaker dollar.”
The dollar dropped to $1.4512 per euro as of 9:44 a.m. in London from $1.4409 in New York last week, after declining to $1.4535, the weakest since Dec. 17. The U.S. currency slid to 92.35 yen from 92.66 yen. The yen fell to 134.04 per euro from 133.46.
China’s customs bureau said on its Web site yesterday that exports rose a greater-than-expected 17.7 percent in December from a year earlier and imports surged 55.9 percent.
Commodity Currencies
Australia’s dollar advanced 0.7 percent to 93.12 U.S. cents, after climbing to 93.20, the highest since Dec. 3. China is the world’s biggest buyer of iron ore, while Australia is the biggest exporter of the material.
New Zealand’s dollar rose 0.4 percent to 73.98 cents. The Canadian dollar advanced 0.5 percent to 97.33 U.S. cents and reached 97.53 cents, the highest since Oct. 15.
“The China data keeps alive the view that the emerging market economies will drive economic activity with the U.S. and the euro-zone lagging behind,” Derek Halpenny, the European head of global currency research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, wrote in a note clients today.
Futures on the Chicago Board of Trade show a 34 percent chance the U.S. central bank will raise its zero to 0.25 percent target lending rate by at least a quarter-percentage point by June, down from 60 percent odds a week earlier. The Labor Department said on Jan. 8 employers unexpectedly cut 85,000 jobs in December, compared with economists’ forecasts for no change.
U.S. benchmark interest rates compare with 0.1 percent in Japan, 3.75 percent in Australia and 2.5 percent in New Zealand, attracting investors to the South Pacific nations’ assets.
‘Sluggish Recovery’
The U.S. jobs report “fits into a pattern of a choppy and sluggish recovery marked by an underlying improvement but with invariable setbacks,” Michael Hart, a Citigroup Inc. currency analyst in London wrote in a research report today. “The dollar sold off in response, in line with a recent pattern that saw it increasingly de-link from successive risk waves.”
The Fed’s near-zero interest-rate policy is “on hold” for now, Bullard said in Shanghai today. He also didn’t see the fed’s liquidity increase as inflationary.
The Dollar Index, which the ICE futures exchange uses to track the greenback against currencies of six major U.S. trading partners including the euro, declined for a second day, losing 0.5 percent.
The Swiss franc weakened versus the euro after central bank President Philipp Hildebrand said the bank will continue to prevent “any excessive appreciation” of the currency.
The Swiss National Bank doesn’t have an exchange-rate target but will “monitor foreign exchange market developments very closely,” Hildebrand, who became head of the central bank on Jan. 1, said in a statement issued in Zurich today.
Loonie, Aussie Parity
The franc weakened to as low as 1.4795 per euro from 1.4753 yesterday and later traded at 1.4775.
The Canadian and Australian dollars will rise to trade at parity or better with the greenback together in 2010 for the first time in 34 years, appreciating at least 3 percent and 8 percent, three of last year’s four best forecasters for both currencies say.
Traders are favoring the so-called loonie and Aussie over the dollar on the Chicago Mercantile Exchange even while betting more than ever on the Dollar Index advancing.
Accelerating U.S. growth will spur demand for Canadian oil and natural gas as China’s expansion boosts purchases of Australian iron ore and coal, pushing both currencies higher, said Sacha Tihanyi, a foreign exchange strategist in Toronto at Bank of Nova Scotia. The loonie and Aussie both rose last week even as the People’s Bank of China took steps to curb lending.
“The global economy is going to strengthen, and the recovery is going to broaden out from what has so far been a China-, Asia-led global recovery,” said John Kyriakopoulos, head of currency strategy in Sydney at National Australia Bank Ltd., the most accurate predictor for both currencies last year.
To contact the reporters on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net
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