The dollar fell against most of its Group of 10 peers after Federal Reserve Chair Janet Yellen said the central bank has a “continuing commitment” to support the economic recovery.
The pound rose to the highest in more than four years after data yesterday showed the U.Kunemployment rate fell to the lowest since 2009, adding to signs the economy is gaining traction. The yen strengthened, snapping a four-day decline versus its U.S. peer before Japan’s Cabinet Office releases its monthly economic report. The Australian and New Zealand dollars erased earlier gains and are set to drop this week.
“It looks like people are pretty keen to go short on the U.S. dollar again, and that’s having positive ramifications across a number of currencies today,” said Chris Weston, the chief market strategist at IG Ltd. in Melbourne. “Sterling looks reasonably strong. The U.K. continues to look relatively healthy compared with other regions.”
The dollar fell 0.2 percent to $1.3844 per euro as of 7:02 a.m. in London. It slid 0.2 percent to 101.99 yen, after rising 0.7 percent in the previous four days. The Japanese currency fetched 141.18 per euro from 141.24 yesterday.
The pound gained 0.2 percent to $1.6831, after reaching $1.6837, the highest since November 2009. The Australian dollar lost 0.1 percent to 93.61 U.S. cents, set to fall 0.4 percent this week. New Zealand’s kiwi was little changed at 86.32 U.S. cents after gaining as much as 0.3 percent. It has fallen 0.6 percent since April 11.
Financial markets in the U.S., U.K., Germany, Hong Kong, Singapore, Australia and New Zealand are among those that will be closed for a holiday tomorrow.
‘Take Profits’
“Before the Easter long weekend in the U.S. and Europe, and after U.S. stocks fell in after-hours trading, traders are selling the dollar to take profits,” said Yuji Saito, a director of foreign exchange at Credit Agricole SA in Tokyo.
Yellen, in her first major speech on her policy framework as Fed chair, said U.S. central bankers must be mindful of how short the Fed is of its goals of full employment and price stability.
“The larger the shortfall of employment or inflation from their respective objectives, and the slower the projected progress toward those objectives, the longer the current target range for the federal funds rate is likely to be maintained,” Yellen told the Economic Club of New York yesterday. The employment shortfall “remains significant, and in our baseline outlook, it will take more than two years to close,” she said.
Fed Outlook
The Fed chief said in March that the central bank may start to increase borrowing costs from near zero “around six months” after concluding its asset-buying program, which economists forecast will end in October.
The pound climbed after data yesterday the unemployment rate dropped below the 7 percent threshold that Bank of England Governor Mark Carney set as an initial guide for considering a boost in interest rates.
The jobless rate, as measured by International Labour Organization methods, dropped to 6.9 percent in the three months through February from 7.2 percent in the quarter through January, theOffice for National Statistics said yesterday. The median forecast in a Bloomberg News survey of economists was a decline to 7.1 percent.
Best Performer
The pound rose 5.2 percent in the past six months against a basket of nine other developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, the biggest gain within the group. The dollar rose 0.6 percent and the euro climbed 2 percent, while the yen dropped 3.8 percent.
Bank of Japan Governor Haruhiko Kuroda said the central bank will examine both upside and downside risks and make policy adjustments if needed. He spoke today at the central bank’s branch manager meeting in Tokyo.
Standard Chartered Plc revised its forecast for the yen against the dollar, predicting it will be at 100 by June 30 from a previous estimate of 104.
“In the absence of a serious downturn in the economy, the central bank may prefer to remain on the sidelines,” Standard Chartered analysts including Callum Henderson, the Singapore-based global head of foreign-exchange research, wrote in an e-mailed note to clients dated yesterday. “There is potential for some investors expecting further easing by the BOJ in the near term to be disappointed.”
The BOJ will expand what is already unprecedented easing by July, according to 72 percent of economists surveyed by Bloomberg. Policy makers announce their next decision on April 30.
To contact the reporters on this story: Kevin Buckland in Tokyo at kbuckland1@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
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