Dollar Rises to 7 Month High Against Yen Before Payrolls Report - forex trading tax implications australia

Dollar Rises to 7 Month High Against Yen Before Payrolls Report ~ forex trading tax implications australia

The dollar rose to a seven-month high against the yen before a report that economists said will show the U.S. added the most jobs in three years, boosting demand for the nation’s assets.

The U.S. currency advanced versus 13 of its 16 major counterparts after data this week showed manufacturing expanded at the fastest pace in more than five years and applications for jobless benefits declined. South Korea’s won and Malaysia’s ringgit advanced as Asian stocks rose on reports showing the region’s economic rebound is gathering pace.

“The U.S. economy is clearly recovering bit by bit,” said Kunihiko Nakaji, chief manager of foreign exchange and financial products in Tokyo at Mitsubishi UFJ Trust & Banking Corp., a unit of the nation’s largest banking group. “The dollar will keep rising against the yen.”

The dollar climbed to 93.99 yen as of 7:22 a.m. in London from 93.82 yesterday in New York, after reaching 94.06, the strongest since Aug. 28. The U.S. currency gained to $1.3561 per euro from $1.3589. Japan’s currency traded at 127.45 per euro from 127.50.

Financial markets in the U.S., U.K., Australia and Hong Kong are closed today for the Good Friday holiday.

Payrolls Report

The dollar headed for a second weekly gain versus the yen before the Labor Department releases its nonfarm payrolls report today. U.S. employers added 184,000 jobs in March, after cutting 36,000 positions in February, according to a Bloomberg survey.

The Institute for Supply Management said yesterday its factory index rose to 59.6, the highest since July 2004. Applications for unemployment insurance payments dropped by 6,000 to 439,000 in the week ended March 27, the Labor Department reported yesterday.

U.S. employment shows “a slowing pace of deterioration that is about to become positive,” Federal Reserve Bank of St. Louis President James Bullard said yesterday. “The recovery is proceeding apace.”

Futures on the CME Group Inc. exchange show a 56 percent chance the Fed will raise the target rate for overnight lending between banks by at least a quarter-percentage point to 0.5 percent by November, up from 47 percent odds a month ago.

Higher U.S. Rates

“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. “Some people are thinking that it could happen by the end of this year, earlier than previously expected. The dollar will strengthen.”

The yen earlier rebounded from a two-month low versus the euro as the 14-day relative strength index for the pair increased to 67, close to the 70 threshold that some traders see as a sign an asset is poised to reverse course.

“As the market is very thin with many markets closed, investors are poised to take profit before the U.S. jobs data, causing the yen to rise,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo.

The won rose for a second day as Asian stocks gained after reports on exports and car shipments showed the economic recovery is taking hold.

Foreign investors purchased more Korean shares than they sold on all but one day since the end of February, according to exchange data. A government report showed yesterday South Korea’s exports rose 35.1 percent in March, compared with 30.5 percent in the previous month.

Buying Stocks

“Foreigners are buying stocks, and there is no reason for the won to weaken right now,” said Kim Yule, a Seoul-based currency trader at BNP Paribas SA. “The won will probably stay at the level of 1,120 for some time.”

The won closed at 1,125.85 per dollar from 1,126.25, completing a 1.2 percent gain this week. The ringgit rose 0.2 percent to 3.2490, extending this week’s gains to 1.7 percent.

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.

“The euro may dip below $1.30 and test lower prices,” Nihei said yesterday. An ichimoku chart also indicates “the euro is still in a downtrend,” he said.

The euro slid 5.7 percent against the dollar last quarter, the biggest three-month drop since September 2008.
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