Forex Roundup: Dollar Climbs ahead of Jobs Data, BOJ Pushes Yen Higher

on Nov 2, 2012

On 2 November 2012, Bloomberg reported that the greenback advanced against most of its major counterparts after data indicated that US employment figures would point to a much anticipated recovery in the US economy. The “currency highlight” of the week, however, was the decision of the Bank of Japan to expand its asset-purchasing programme. While the BOJ policy move pushed the yen higher at first, the Japanese currency lost some of its gains, with positive Chinese and US economy data boosting risk appetite.

**Greenback Advances against Most Peers**
The US dollar strengthened against most peers, reaching $1.2901 per euro as of 7:11 a.m. in London, according to Bloomberg data. The move was in line with the greenback’s weekly gain of 0.3 percent against the single currency. The US dollar benefitted from expectations that US employment data would indicate a recovery in the world’s biggest economy.

“If we get very good data out of the US, we might actually see people going to the US dollar because, on a relative basis, the US is much better” than the Eurozone, commented Lee Sue Ann, economist at United Overseas Bank (SGX:U11), as quoted by Bloomberg. “If we get very bad data and things are not so good, usually the dollar is also supported because it’s a safe-haven currency.”

**Yen Gives up BOJ Action Gains**
The greenback rose versus the yen as well, gaining 0.4 percent to 80.12 yen per dollar at 5 p.m. in New York on November 1, with the yen headed for a third weekly drop against the US dollar. Earlier in the week, however, Japan’s currency hit its strongest level in more than a week, after the BOJ announced further monetary easing on October 30. And while one of the aims of monetary easing is to weaken the yen, analysts had anticipated a bolder move, with Reuters quoting Societe Generale (EPA:GLE) analyst Kit Juckes as saying that “the BOJ produced no rabbit, and no bazooka policy.”

!m[Sterling Strengthens Against The Euro ](/uploads/story/708/thumbs/pic1_inline.png)The yen, however, lost ground against most majors on November 1, with the Financial Times reporting that positive data on the China and US economy helped risk appetite. “The yen has weakened in the
Asian trading session in part reflecting an easing of safe haven flows driven by building investor optimism that the economic slowdown in China appears to be tentatively reversing course,” noted Derek Halpenny, currency strategist at Bank of Tokyo-Mitsubishi, as quoted by the FT.

**Britain’s Currency Advances**
The pound strengthened against the euro on November 2, with Bloomberg reporting that the UK currency benefitted from data by the Nationwide Building Society showing that the cost of a home went up by 0.6 percent from September. Earlier in the week, the pound hit $1.6175, its highest level against the US dollar since October 17.
**Sweden’s Krona Slumps**
In the past week, Sweden’s currency suffered from data indicating that the contraction in the Scandinavian country’s manufacturing sector had deepened in September. On November 1, Bloomberg reported that a Swedbank-compiled index based on responses from about 200 purchasing managers fell to a seasonally adjusted 43.1 in October, its lowest score in more than three years. As a result, the krona lost 0.45 percent against the single European currency, and 0.6 percent versus the US dollar.
Norway’s manufacturing decline deepened as well, with the country’s PMI falling to 48.7 from a revised 49.1 in September. The Norwegian krone lost 0.2 percent against the dollar, but was little changed against the euro.
“We are now also starting to see ramification effects from the euro-zone woes into Norway,” said Shakeb Syed, chief economist at SpareBank1 Markets, as quoted by Bloomberg. “Sweden doesn’t have the upside effects from the oil industry that Norway has” and is “feeling the strain more than we are doing.”


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