Dollar Rises on Speculation Gain in Jobs Will Sustain Recovery ~ forex trading income tax australia
By Oliver Biggadike and Inyoung Hwang
April 2 (Bloomberg) -- The dollar strengthened against most of its major counterparts and climbed to a seven-month high versus the yen on speculation gains in the labor market will help sustain the U.S.’s economic recovery.
The greenback rose against 13 of the 16 most-traded currencies as the Labor Department said employers added 162,000 jobs last month. Canada’s dollar approached parity as the report fueled optimism that consumer demand in the U.S., the nation’s largest trading partner, will help boost exports.
“It’s a dollar move,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York. “The dollar is cheap because it’s trading below fair-value models. And what does that mean? It means that U.S. labor costs are relatively cheaper compared to Europe, or maybe Japan, or the U.K. or Switzerland. And over time that affects business decisions.”
The dollar advanced 0.8 percent to 94.54 yen at 12:32 p.m. in New York, from 93.82 yen yesterday. It touched 94.69, the highest level since Aug. 24, and posted a weekly gain of 2.2 percent. The U.S. currency appreciated 0.8 percent to $1.3486 per euro, from $1.3589. It fell 0.6 percent on the week. The yen was little changed at 127.46 versus the 16-nation currency, compared with 127.50 yesterday.
Biggest Since 2007
The gain in employment, the biggest since a 239,000-job increase in March 2007, followed a revised reduction of 14,000 in February, a slower rate of job cuts than the government’s previous estimate of a decline of 36,000. The median forecast of 83 economists in a Bloomberg survey was for an increase of 184,000 jobs. The unemployment rate held steady at 9.7 percent.
Treasury Secretary Timothy F. Geithner said the payrolls report shows the U.S. economy is “getting stronger.” Business investment is expanding and exports are “coming back,” he said in an interview on Bloomberg Television.
Financial markets in the U.S., U.K., Australia and Hong Kong are closed today for the Good Friday holiday. Trading in U.S. Treasuries ends at noon New York time.
Futures on the CME Group Inc. exchange showed a 60 percent chance the Fed will raise the target rate for overnight lending between banks by at least a quarter-percentage point by November, up from 45 percent odds a month ago. The rate has been a range of zero to 0.25 percent since December 2008, and policy makers reiterated on March 16 it would remain low for an “extended” period.
Dollar Rally
The greenback climbed for a fourth straight day against the yen, its longest rally since the five trading sessions ended Feb. 18, according to data compiled by Bloomberg.
“Japan’s economy is recovering, but it’s still not strong enough,” said Amelia Bourdeau, a currency strategist at UBS AG in Stamford, Connecticut, who predicts a dollar rally to 95 yen in the next three months.
U.S. manufacturing expanded last month at the fastest pace since July 2004, the Institute for Supply Management’s factory index showed yesterday. It increased to 59.6, indicating quicker growth than February’s 56.5 reading. Other data showed China’s manufacturing grew at a faster pace and confidence among Japan’s largest manufacturers rose for a fourth straight quarter.
“As the U.S. economic outlook picks up, expectations for a rate increase by the Fed should rise,” said Susumu Kato, chief economist in Tokyo at Credit Agricole CIB and CLSA.
Canadian Dollar
The Canadian dollar declined 0.2 percent to C$1.0108 per greenback after earlier weakening as much as 0.4 percent. It was still near the closest to parity with its U.S. counterpart since July 2008.
The euro may drop to a 13-month low of $1.2457 should it complete a so-called dead-cross formation, Yoh Nihei, a Tokyo- based trading group manager at Tokai Tokyo Securities Co. said, citing trading patterns.
A chart of the 16-nation currency shows its 20- and 90-week moving averages are falling toward the 200-week indicator, suggesting a dead cross pattern will be created, Nihei said. A dead cross appears when a short-term average drops below a longer-term one and signals a security will extend losses.
President Barack Obama urged China to help balance global growth as strategists said President Hu Jintao’s decision to visit Washington this month increases the likelihood his nation will escape being branded a currency manipulator by the U.S.
In an hour-long call yesterday, Obama sought Hu’s support for Group of 20 pledges to sustain the global economic recovery and for cooperation to help stop Iran from developing nuclear weapons.
Hu’s presence at this month’s nuclear summit improves the chances China won’t be labeled a manipulator when the U.S. Treasury releases its biannual report on exchange rates, said China International Capital Corp., a Beijing-based investment bank that’s part-owned by Morgan Stanley.
The People’s Bank of China said in its 2009 international financial markets report posted on its Web site that the dollar will have only a limited rebound in 2010 because of the nation’s high fiscal deficit and low interest rates.
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