Dollar Gains a 7th Week Before Jobs; Yen Drop Spurs Bankruptcies

//Dollar Gains a 7th Week Before Jobs; Yen Drop Spurs Bankruptcies

Dollar Gains a 7th Week Before Jobs; Yen Drop Spurs Bankruptcies

By | 2014-12-05T06:18:34+00:00 December 5th, 2014|Business|0 Comments

The dollar headed for a seventh
weekly gain, after rising above 120 yen yesterday for the first
time since July 2007, as economists predicted U.S. job growth
quickened while Japan is in recession and Europe struggles.

The U.S. currency has gained at least 3.8 percent versus
all 16 major peers in the past three months amid speculation the
Federal Reserve will boost interest rates next year. Corporate
bankruptcies in Japan related to the weak yen jumped last month
to the most since at least January 2013, an industry survey
showed. Malaysia’s ringgit slid to a five-year low as the
decline in crude prices damped the nation’s growth outlook.

“It’s hard to imagine a weak payrolls report, so the risk
for dollar-yen is slanted to the upside,” said Takako Masai,
general manager of the markets sub-group at Shinsei Bank Ltd. in
Tokyo. “The market is pricing in the potential for a further
expansion of monetary stimulus by the Bank of Japan. The dollar
may race up to 130 yen by around the end of March.”

The dollar rose 0.2 percent to 120.02 yen at 6:01 a.m. in
London, having gained 1.2 percent this week. It reached 120.25
yesterday, the highest since July 2007. The greenback was
unchanged at $1.2379 per euro after advancing to $1.2280
yesterday, the strongest since August 2012. The euro climbed 0.2
percent to 148.57 yen.

Job Growth

U.S. employers added 230,000 workers in November after
hiring 214,000 the previous month, according a Bloomberg News
survey before today’s Labor Department report. Payrolls have
increased by more than 200,000 for nine straight months.

The Fed will increase its benchmark interest rate in about
nine months, based on data compiled by Morgan Stanley, one of
the 22 primary dealers that trade with the Fed.

The dollar has surged 7.1 percent in the past three months,
the best performer of 10 developed-nation currencies tracked by
Bloomberg Correlation-Weighted Indexes. The euro rose 1.8
percent, while the yen slumped 7.6 percent, the biggest decline.

“If the payrolls number is good, dollar-yen will rise, but
we’re getting pretty close to the end of this rally,” said
Kazuo Shirai, a trader at MUFG Union Bank NA in Los Angeles.
“The move has been very fast, without a major correction lower.
I don’t think we’ll get to 125 anytime soon.”

Corporate bankruptcies due to the yen climbed to 42 last
month, the most since surveys started in January 2013, according
to a survey by Teikoku Databank Ltd. Yen-induced bankruptcies
have broken a record for three straight months, it said.

Yen Outlook

The yen will keep weakening regardless of the outcome of a
national election on Dec. 14, Nomura Holdings Inc. said.

The currency’s most-accurate forecaster predicts a decline
of more than 4 percent to 125 per dollar by the end of next
year, a level last seen in 2002. The yen has already tumbled
more than 15 percent since June 30.

The ringgit fell for a third day as the selloff in oil
sapped the growth outlook for the net oil-exporting nation.

Benchmark brent crude has slumped 17 percent in the past
month as the Organization of Petroleum Exporting Countries
decided not to cut output to shore up prices. Malaysia’s
overseas shipments contracted in October for the first time in
16 months, official data showed today.

“‘Malaysia is the only Asian country that really doesn’t
benefit from lower oil prices,” said Mitul Kotecha, head of
Asia currency strategy at Barclays Plc. in Singapore. “Being a
net exporter of oil, Malaysia suffers more than others.”

The ringgit declined 0.8 percent to 3.4722 per dollar after
falling to 3.4757, the weakest since October 2009.

Volatility Falls

A gauge of traders’ expectations of currency swings fell
yesterday after matching a 15-month high. JPMorgan Chase Co.’s
global foreign-exchange volatility index dropped to 8.96 percent
after increasing to 9.48 percent, matching the highest since
September 2013.

The euro rose from a two-year low yesterday after European
Central Bank President Mario Draghi said policy makers will wait
to assess if additional stimulus is needed.

The common currency has dropped 9.9 percent versus the
dollar this year as the ECB cut interest rates and started
purchases of asset-backed securities and covered bonds to help
spur growth.

“We’re looking for the euro to go down to $1.07 by the end
of 2015,” Marvin Barth, head of European foreign-exchange
strategy at Barclays Plc in London, said in a Bloomberg
Television interview. “You’ve reached a tipping point in
people’s expectations to where the euro is likely to go. The ECB
is providing a significant amount of accommodation in
conjunction with negative deposit rates.”

To contact the reporters on this story:
Mariko Ishikawa in Tokyo at
mishikawa9@bloomberg.net;
Kevin Buckland in Tokyo at
kbuckland1@bloomberg.net

To contact the editors responsible for this story:
Garfield Reynolds at
greynolds1@bloomberg.net
Nicholas Reynolds, Jonathan Annells