Dollar Extends Gains as Service Industries Exceed Forecasts

Bloomberg (05/11) -- The dollar extended gains after a gauge of service industries rose more than forecast in October, adding to the case for the Federal Reserve to taper monthly bond purchases.

The euro dropped against the yen after European Central Bank Executive Board member Joerg Asmussen said the economic recovery is “still very green” before the bank’s policy meeting this week. Japan’s currency appreciated versus most of its 16 major counterparts as the Bank of Japan’s governor said efforts to dispel the country’s deflation are succeeding. U.S. payrolls for October will be released Nov. 8.

The service-industries report “was stronger than expected, both on the headline and the underlying data,” Brian Daingerfield, a Stamford, Connecticut-based currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit, said in a telephone interview. “The data has increased some optimism that there may not be a downside surprise on payrolls on Friday, which is why we’re seeing a stronger dollar today.”

The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major currencies, rose 0.3 percent to 1,015.74 at 10:32 a.m. New York time after touching 1,017 yesterday, the highest since Sept. 18.

The yen rose 0.5 percent to 132.57 per euro after appreciating to 132.37, the strongest level since Oct. 10. Japan’s currency gained 0.1 percent to 98.48 per dollar. The euro dropped 0.4 percent to $1.3462 after sliding to $1.3442 yesterday, the weakest since Sept. 18.

The Institute for Supply Management’s non-manufacturing index increased to 55.4 from the prior month’s 54.4, the Tempe, Arizona-based group said today. A gauge above 50 shows expansion. The median estimate in a Bloomberg survey of economists was 54.

Payroll gains will shrink to 120,000 in October, according to the median forecast of 88 economists in a Bloomberg survey, as federal workers furloughed during the 16-day partial government shutdown will be counted as unemployed. The jobless rate is predicted to rise to 7.3 percent, according to another survey.