Dollar Surges against the Yen on Monetary Policy Divergence

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Dollar Surges against the Yen on Monetary Policy DivergenceThe dollar touched its highest level in nearly seven years versus the yen as the Bank of Japan prepares to boost monetary stimulus and the Federal Reserve gets ready to raise interest rates.

The greenback rallied against its peers after an index of manufacturing grew faster than expected. The dollar jumped 1.6 percent to trade at 114.06 yen as of 11:07 a.m. in New York and touched 114.22 yen, its strongest level since December 2007. The U.S. currency appreciated 0.3 percent against the euro to $1.2489 after earlier advancing to $1.2440, its highest level since August 2012. The yen fell 1.3 percent to 142.46 per euro as Japanese financial markets closed on Monday for a holiday.

“The U.S. is accelerating while the rest of the world, particularly Japan and the euro zone, is decelerating,” said Mark McCormick, a New York-based foreign-exchange strategist at Credit Agricole SA, told Bloomberg News. “Macro investors really are hoping for this divergence story to play out because that’s where relative value can be generated.”

The U.S. Institute for Supply Management’s gauge of manufacturing jumped to 59 in September, beating analysts’ expectations for a drop to 56.1. A measure above 50 portends growth. Another report due on Nov. 7 is expected to indicate that jobless rate stood at 5.9 percent, a low since July 2008.

The Australian dollar dropped the most in at least two weeks after the nation’s building approvals declined the steepest since July 2012 while Chinese manufacturing declined. The Aussie dropped 1.1 percent to 87.05 U.S. cents after depreciating 0.4 percent on Oct. 31. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com