Dollar Trades Near 1-Week High on Signs Global Slump Is Abating

Aug. 10 (Bloomberg) -- The dollar traded near a one-week high against the euro on signs the U.S. economy is emerging from recession, boosting the appeal of the nation’s assets.

The dollar was close to a seven-week high versus the yen as U.S. employers eliminated fewer jobs last month than economists forecast, adding to evidence the slump in the world’s largest economy is abating. The yield advantage of 10-year Treasuries over similar-maturity Japanese bonds widened to 2.42 percentage points, the most since November, making U.S. assets more attractive to Japanese investors.

“Economies around the world are improving, with the U.S. leading the way,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “The dollar is likely to be bought and the yen will probably be sold.”

The dollar traded at $1.4195 per euro as of 9:38 a.m. in Tokyo from $1.4183 in New York on Aug. 7, when it rose to $1.4155, the highest level since July 31. The U.S. currency declined to 97.23 yen from 97.57 yen. It touched 97.79 yen on Aug. 7, the strongest since June 16.

The euro fell to 138.01 yen from 138.41 yen on Aug. 7, when it climbed to 138.72 yen, the highest since June 5. Europe’s currency traded at 85.07 pence from 84.98 pence. Exchange-rate movements may be exaggerated by Japan’s O-bon holidays this week, when Japanese often take week-long vacations to honor ancestors, Ishikawa said.

The gains in the greenback on Aug. 7 marked a return to the view that good U.S. economic news should benefit the currency as traders speculated that the Federal Reserve will boost borrowing costs sooner rather than later.

U.S. Jobs

U.S. employers eliminated 247,000 jobs in July after a revised decrease of 443,000 in the previous month, the Labor Department said on Aug. 7. The median forecast of 82 economists surveyed by Bloomberg News was for a reduction of 325,000. The unemployment rate decreased to 9.4 percent, whereas economists predicted an increase.

The Dollar Index, which the ICE uses to track the dollar against the currencies of six major trading partners including the euro, yen and pound, advanced 0.8 percent last week to 78.975. The gauge was at 78.845 today.

The yen gained amid speculation Japanese exporters took advantage of the currency’s drop to a seven-week low versus the dollar and a two-month low against the euro to repatriate funds.

“Exporters have placed a lot of yen-buying orders because of this week’s O-bon holidays,” said Yoh Nihei, trading group manager at Tokai Tokyo Securities Co. in Tokyo. “This is a factor for the yen to strengthen.”