Dollar Gains as U.S. Jobless-Claims Data Remain Low

April 9, 2015 Wall Street Journal

April 9, 2015
By James Ramage

Dollar Gains as U.S. Jobless-Claims Data Remain Low
Recent data have led to doubts on the health of the U.S. economy

The dollar rose against the euro and the yen on Thursday after solid U.S. jobless claims data helped reinforce views of an interest-rate rise in the second half of the year.

The euro dropped to $1.0656 from $1.0769 ahead of the numbers, its weakest since March 20 and 1.2% lower on the day. The dollar rose to ¥120.43 against the Japanese currency, from ¥119.96 beforehand, erasing early morning losses and rising 0.2% for the session.

Recent mixed economic data have led to doubts on the health of the U.S. economy and created uncertainty on the timing of the next interest-rate rise by the Federal Reserve.

This uncertainty in the market has slowed the dollar’s rapid appreciation over the past year, leaving it below multiyear highs, and now at levels that are again drawing investors, said Karl Schamotta, director of currency risk and strategy at Cambridge Global Payments.

The dollar accelerated slowly after a measure for initial jobless claims arrived in line with forecasts, but remained at historically low levels.

The four-week moving average for initial jobless claims, which smooths out weekly volatility, declined to 282,250 last week, the lowest level since June 2000, the Labor Department said.

The greenback’s rise came a day after minutes from the Fed’s latest policy meeting showed central bankers more optimistic on the economy’s strength than investors believed.

“We expect to see the dollar regain upward momentum,” Mr. Schamotta said. And against the euro, in particular, the U.S. currency “has a right to parity. We believe that the dollar is headed higher, but at an extremely cautious pace. Bulls will likely need to wait until the next nonfarm payrolls report before we break the $1.05 mark.”

Market expectations for the first Fed rate boost have been sliding further back into 2015 from midyear, particularly after gauges for business investment, consumer spending and manufacturing output have signaled a slowdown through the first three months of the year. The surprisingly weak March jobs report pushed back the market’s expectations to late 2015, and even into next year.

Many traders and investors on Thursday were betting that the Fed could raise interest rates as early as October, according to CME Group data on fed funds futures. One day earlier, more market participants had wagered on a December timeline.

Higher U.S. borrowing costs would make the dollar more attractive as it would boost returns on assets denominated in the currency.

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