Dollar Rises Most Against Euro Since April on U.S. Jobs Data

June 5 (Bloomberg) -- The dollar advanced the most against the euro since April and rose to a four-week high versus the yen after a U.S. government report showed employers cut fewer jobs last month than economists forecast.

The greenback climbed against almost all of the other major currencies as a slower deterioration of the labor market supported bets dollar-denominated assets will gain as the U.S. leads the global economy out of a recession. The yen fell versus the Australian and New Zealand dollars on speculation investors will increase purchases of higher-yielding assets.

“We may be moving to a situation where stronger economic numbers are actually good for the dollar,” said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. “It may be just a hint that the pessimism on the dollar has been overdone and we’re moving to a dollar that is not necessarily stronger but perhaps more consistent with the recent improvement in the U.S. economic data.”

The dollar appreciated as much as 1.8 percent versus the euro, the biggest intraday gain since April 27, before trading at $1.3966 at 4:01 p.m. in New York, compared with $1.4183 yesterday. The dollar rose 2.4 percent to 98.85 yen, from 96.58, after touching 98.89, the highest level since May 8. The euro climbed 0.8 percent to 138.01 yen from 136.97.

The trade-weighted Dollar Index increased today as traders added to bets demand for assets denominated in the greenback will rise in an economic recovery. The measure used by the ICE to track the dollar’s value against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona advanced 1.9 percent this week after last month’s 6.4 percent decline.

‘Potential Shift’

“If the U.S. is potentially going to lead a recovery, why is it going to be penalized?” said Alan Ruskin, head of international currency strategy in North America at RBS Securities Inc. in Stamford, Connecticut. “There’s a potential shift in correlations that relates to people reconsidering whether good U.S. news is bad for the dollar.”

The dollar fell earlier this week to its lowest level in 2009 against the euro on concern the quadrupling of the U.S. government’s budget deficit this year would sap demand for Treasuries among overseas investors and central banks.

The Australian and New Zealand dollars rose against the yen for a fourth time in five days on bets the U.S. payrolls report will spur carry trades, in which investors borrow funds in a country with low interest rates and buy assets where returns are higher. The target lending rate of 0.1 percent in Japan compares with 3 percent in Australia and 2.5 percent in New Zealand.

‘A Green Light’

“It’s a green light for some more risk-seeking trades out there in the currency market,” said Samarjit Shankar, a director of global strategy in Boston at Bank of New York Mellon Corp., which administers more than $20 trillion in assets. “There’s more momentum to the view that the worst of the cycle might be behind us.”

U.S. job cuts slowed to 345,000 in May, fewer than the revised decrease of 504,000 in the previous month, the Labor Department reported today in Washington. The median forecast of 76 economists surveyed by Bloomberg News was for a 520,000 reduction. The unemployment rate rose to 9.4 percent.

Japan’s currency fell 0.7 percent to 61.66 against the New Zealand dollar and 0.9 percent to 78.17 versus the Aussie.

Canada’s dollar, known as the loonie, slipped 2 percent to C$1.1190 versus the greenback as a Canadian government report showed the economy lost jobs for a sixth time in seven months, pushing unemployment up to 8.4 percent. The loonie fell 2.5 percent this week against its U.S. counterpart.

Dollar Versus Yen

The dollar also gained against the yen on speculation the Federal Reserve will raise interest rates later this year, reducing the cost advantage of borrowing in the U.S. to fund purchases elsewhere.

Traders added to bets the U.S. central bank will increase its target rate for overnight loans between banks, now in a range of zero to 0.25 percent, by its November policy meeting, according to futures traded on the Chicago Board of Trade. The contracts show a 67 percent chance of a rate increase at that meeting, compared with 24 percent odds a week ago.

The euro’s decline against the dollar may extend for the next two to four weeks provided the 16-nation currency breaks its five-week trend support line by falling below $1.3885, Andrew Chaveriat, a technical strategist at BNP Paribas SA in New York, wrote in a note.

“Euro-dollar is currently suffering the biggest short-term downswing since the April rally began,” said Chaveriat, citing the end of a rising trend that began May 18 and the euro’s decline below support at $1.3995, the 24 percent retracement of its gains since April.

Support Levels

Support is a level where orders to buy or sell a currency may be clustered, and trends are patterns traders identify on charts that describe a currency’s path higher or lower.

The pound traded near its lowest level this month against the dollar as Prime Minister Gordon Brown rearranged his cabinet amid calls for his resignation.

Sterling slid 1.2 percent to $1.5977 after touching $1.5941, the weakest since May 29. It briefly erased its decline as the U.S. jobs report spurred speculation that demand for Britain’s assets will rise.