The dollar rose against the euro in London for the fourth day in five on speculation employment growth in the world's largest economy is accelerating. The U.S. may report on Friday that more jobs were generated in February than in any month since November 2000. Federal Reserve policy makers have indicated that they will only raise the bank's benchmark interest rate from a 45-year low of 1 percent once the economy is generating more jobs.
Against the euro, the dollar rose to $1.2397 as of 8:07 a.m. in London, near its lowest in a month, from $1.2457 late yesterday in New York. The U.S. currency has recovered 4.1 percent since falling to a record low of $1.2930 on Feb. 18. ``If we do get better employment figures, the Fed may tighten policy earlier,'' said Harriett Richmond, who oversees $50 billion as head of currency management in London at J.P. Morgan Fleming Asset Management. ``We could see a better performance for the dollar.'' Expectations that Friday's report may show better jobs growth were heightened yesterday when the Institute for Supply Management said its measure of factory employment rose to the highest since December 1987. The U.S. probably created 130,000 jobs last month, according to the median estimate of 59 economists surveyed by Bloomberg News. About 112,000 jobs were created in January. By contrast, recent evidence suggests that the euro's 13 percent advance against the dollar in the past six months is starting to hurt the confidence of companies in the economy of the 12-country region.
Drop in French Confidence
French consumer confidence unexpectedly fell in February as unemployment near a 3 1/2-year high deterred spending in Europe's third-biggest economy, according to a survey from the Paris-based Insee, the national statistics office. Last week, a report from Germany showed business confidence in Europe's largest economy dropped in February for the first time in 10 months. Fiat SpA, Italy's biggest carmaker, said on Friday the euro's rise added 5 percentage points to the decline in fourth-quarter sales. ECB President Jean-Claude Trichet will hold a press conference after the bank meets on Thursday and will probably keep its rate at a six-decade low of 2 percent, according to all but one of 36 economists polled by Bloomberg News. ``Any weak data out of the euro zone, especially figures that remain weak in coming months, will raise speculation of rate cut by the ECB, further pushing down the euro,'' said Satoru Ogasawara, a Tokyo-based strategist at Credit Suisse First Boston, a unit of Switzerland's second-largest bank.
ECB Under Pressure
The ECB is facing pressure from politicians in France and Germany to reduce interest rates later this year. German Chancellor Gerhard Schroeder said Friday after a meeting with U.S. President that the euro's 44 percent rally in the past two years is causing concern about Europe's economy. The euro earlier reached its lowest against the British pound in a year. The Bank of England holds its next policy meeting Thursday. Economists surveyed by Bloomberg News expect the bank to raise its benchmark lending rate in May. Against the yen, dollar gains may be limited by overseas investors pouring money into an economy that's growing at its fastest in 13 years. The Japanese currency was at 109.17 against the dollar from 109 yesterday.
Japan's benchmark stock index rose 0.8 percent today to 11,361.51, the highest close since June 2002. The Nikkei 225 Stock Average returned 24 percent in 2003, the first gain in four years, and added 6.4 percent this year. ``Overseas investors will continue to seek Japanese shares, lured by an economic recovery,'' said Tomoko Fujii, a Tokyo-based member of the global strategist team of Citigroup Inc., the world's biggest financial-services company. ``That will ensure demand for the yen.'' ///www.bloomberg.com