Unprecedented easing policies by the Bank of Japan and European Central Bank are bearing fruit in the world’s biggest market, sending the yen to an almost six-year low and the euro to its longest ever weekly losing streak.
The Bloomberg Dollar Spot Index rose to a 14-month high amid prospects for higher U.S. interest rates and before data forecast to show employers boosted payrolls in August.
The yen was poised for a fourth weekly decline after the BOJ maintained record stimulus Thursday.
The euro has tumbled since the ECB on Thursday unexpectedly cut its main refinancingrate to a record and signaled purchases of asset-backed securities. South Korea’s won weakened.
“The policy divergence between Japan and the U.S.” and a decline in the euro has helped weaken the yen, said Daisuke Karakama, chief market economist at Mizuho Bank Ltd. in Tokyo. “I expect the yen to test 108 by the end of next month as the Fed normalizes policy.”
The yen dropped 0.1 percent to ¥105.34 per dollar at 6:58 a.m. in London after sliding to ¥105.71, the weakest level since October 2008. The currency was little changed Friday at ¥136.21 per euro.
The euro fell 0.1 percent to $1.2933 after dropping to $1.2920 on Thursday, the lowest since July 2013. The currency tumbled 1.5 percent this week. The euro’s eight-week losing streak is the longest since the currency began trading in 1999.
Strength in the greenback also saw the pound, Swiss franc and New Zealand dollar fall to their weakest levels in months. The franc dropped as low as 0.9336 per dollar, the least since September 2013. Sterling depreciated to $1.6287 and the kiwi declined to $0.82, the lowest since February. Turnover in the global foreign-exchange market is about $5.3 trillion a day.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 developed-market peers, rose 0.1 percent to 1,040.43 after climbing to 1,041.58, the highest since July 2013.
Economists said a U.S. report Friday would show employers boosted payrolls by 230,000 in August, the seventh month job creation has been above 200,000, according to a Bloomberg survey.
Fed Gov. Jerome Powell said the U.S. labor market has “improved substantially” and that “significant parts” of the Federal Open Market Committee statement need to change.
There’s a 45 percent chance the Fed will raise its benchmark interest-rate target to at least 0.5 percent by June 2015, according to futures data compiled by Bloomberg. Policy makers have kept the key rate near zero since December 2008. The Fed next meets on Sept. 16 and 17.
“The market is increasingly positioning for a change in Fed language and that will keep the dollar in the ascendancy,” said Ray Attrill, global co-head of currency strategy at National Australia Bank Ltd. in Sydney. “The ECB’s move overnight adds to that conviction.”
Gross domestic product in the euro area stagnated in the second quarter, according to a Bloomberg survey before preliminary data was released Friday.
ECB President Mario Draghi pledged Thursday to “significantly steer” the ECB balance sheet back toward the €2.7 trillion ($3.5 trillion) of early 2012 from €2 trillion, announced a final round of interest-rate cuts and a plan to buy securitized debt and covered bonds. A bond-buying program was also discussed, he said.
A stronger dollar isn’t particularly negative for Japan, BOJ Gov. Haruhiko Kuroda said Thursday. Japanese policy makers maintained their pledge to increase the monetary base at an annual pace of ¥60 trillion to ¥70 trillion.
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