The dollar weakened, pushing a gauge of its strength down from a four-year high, after a report last week showed jobs increased even as participation fell, fueling debate over when the Federal Reserve will raise interest rates.
The greenback depreciated versus the majority of higher-yielding currencies, falling the most against the Australian dollar. The yen strengthened from near its weakest since 2008 before the Bank of Japan’s policy decision tomorrow. The euro advanced against the U.S. currency, three days after touching a two-year low, even as German data showed factory orders declined the most since 2009 in August.
“The market will want to reassess the speed with which the Fed will be moving from here,” Valentin Marinov, Citigroup Inc.’s London-based head of European Group-of-10 currency strategy, said in an interview on Bloomberg Television’s “On The Move” with Jonathan Ferro. “Overall the Fed is moving towards the exit, will be hiking rates before long, and that should, over the longer term, continue to support the dollar.”
The Bloomberg Dollar Spot Index fell 0.4 percent to 1,074.83 at 6:52 a.m. New York time, having touched 1,080.05 on Oct. 3, the highest intraday level since June 2010.
The greenback slipped 0.3 percent to $1.2549 per euro after touching $1.2501 on Oct. 3, the strongest level since August 2012. The 18-member common currency weakened 0.1 percent to 137.28 yen. The yen gained 0.4 percent to 109.37 per dollar after reaching 110.09 on Oct. 1, the weakest since August 2008.
Fed Chair Janet Yellen faces a dilemma over when to raise borrowing costs from a record low partly because economic data are uneven. While the U.S. jobless rate declined to a six-year low in September, the so-called participation rate, which measures the number of Americans employed or looking for a job as a share of the working-age population, decreased to 62.7 percent, the lowest since February 1978.
The dollar has jumped 7.3 percent in the past three months, the best performer in that period among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, as investors bet the Fed will raise interest rates next year. The yen weakened 0.6 percent and the euro declined 1.8 percent.
German factory orders, adjusted for seasonal swings and inflation, fell 5.7 percent in August, after climbing a revised 4.9 percent in July, the Economy Ministry in Berlin said today. Analysts predicted a 2.5 percent decline, according to the median estimate in a Bloomberg News survey.
The Bank of Japan, which buys about 7 trillion yen of government bonds a month, started a two-day meeting today. While BOJ Governor Haruhiko Kuroda said last week that he doesn’t think a weak yen is bad for the Japanese economy overall, Prime Minister Shinzo Abe today said the government will watch for effects of the currency’s decline and take measures.
“Most of the market participants, and this is showing up in yen exchange rates, are expecting the BOJ will wait a little bit longer” before adding any new economic stimulus, said Ulrich Leuchtmann, the head of currency strategy at Commerzbank AG in Frankfurt. “While the Bank of Japan and government in general are fine with the weaker yen, they don’t want it to be so hefty or so quick as we have seen recently.”
Sweden’s krona strengthened versus the euro and the Norwegian krone after Sweden’s largest food retailer ICA Gruppen AB sold a unit to Coop Norway. Bets the sale will boost Sweden’s krona are “the driving force behind the drop,” according to Martin Enlund, an analyst at Nordea Bank AB in Stockholm.
The krona advanced 0.3 percent to 9.0851 per euro and also strengthened 0.3 percent to 1.1127 per Norwegian krone.