The dollar fell the most in more than a week against the yen as investors gauge the timing of Federal Reserve interest-rate increases after reports showing a strengthening jobs market.

The Bloomberg Dollar Spot Index rose earlier after Goldman Sachs Group Inc. brought forward its interest-rate forecast. Brazil’s real fell the most among major currencies as economists surveyed by the central bank lowered their 2014 growth outlook. South Africa’s rand slumped as a strike by metal workers entered a second week. Indonesia’s rupiah strengthened the most in more than seven months before presidential elections this week.

“Although we had a relatively good jobs report, you really don’t have the big case for inflation and a rates-higher story yet,” Brad Bechtel, managing director at Faros Trading LLC in Stamford, Connecticut, said in a phone interview. “Yields will remain relatively contained, and that’ll keep the dollar relatively contained as well.

The dollar fell 0.2 percent to 101.86 yen as of 5 p.m. New York time after weakening as much as 0.3 percent, the biggest drop since June 27. The U.S. currency fell 0.1 percent to $1.3605 per euro after advancing to $1.3576, the strongest since June 26. Japan’s currency climbed 0.1 percent to 138.58 per euro.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was little changed at 1,007.30 after three days of gains.

U.S. Treasury 10-year note yields fell three basis points, or 0.03 percentage point, to 2.61 percent after increasing 10 basis points last week.

Real’s Weakness

Brazil’s real fell 0.5 percent to 2.2249 per dollar, the biggest decline among the 16 major currencies tracked by Bloomberg.

Economists reduced their growth forecast for this year to 1.07 percent from 1.10 percent a week earlier, according to the median of about 100 estimates in a central bank survey published today. Moody’s Investors Service said in a research report published today that Brazil’s slower growth and accelerating inflation are credit-negative.

‘‘Expectations for the second half of the year aren’t good, and the currency reflects that bad sentiment,” Reginaldo Galhardo, foreign-exchange manager at Treviso Corretora de Cambio in Sao Paulo, said in a telephone interview.

Rand, Rupiah

The rand slipped 0.2 percent 10.7794 per dollar and closed at 14.6643 per euro, a decline of 0.3 percent.

The National Union of Metalworkers of South Africa will meet employers for talks on June 9. The strike that began on July 1 has been marred by violence, caused General Motors Co. to halt production because of a disruption of auto-component supplies, and threatens about a third of South African manufacturing output. Moody’s Investors Service said last week the nation’s credit rating may be at risk because of the walkout.

“After last week’s losses and given the worries over the strike, there is a mild bias for further weakness,” John Cairns, currency analyst at Rand Merchant Bank in Johannesburg, said in an e-mailed note.

The rupiah advanced to the strongest in five weeks on optimism presidential frontrunner Joko Widodo’s pledge to fight corruption will help him win this week’s vote.

Indonesia’s currency closed 1.5 percent stronger at 11,710, the biggest advance since Dec. 2, prices from local banks show.

U.S. policy makers will boost their benchmark rate in the third quarter of 2015, rather than the first quarter of 2016, Goldman Sachs Chief Economist Jan Hatzius wrote yesterday in a research note.

‘Upward Momentum’

The investment bank joins companies including JPMorgan Chase & Co. and Bank of Tokyo-Mitsubishi UFJ Ltd. in moving up its Fed estimates after U.S. data last week showed the economy added 288,000 workers in June, compared with the 215,000 projected by a Bloomberg News survey of analysts.

“The market will likely take its direction from developments in U.S. yields in the week ahead,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “If we were to see further upward momentum in short-term yields going forward, that would provide upward momentum for the dollar.”

The Fed will release the minutes of its June 17-18 meeting on July 9. Policy makers have kept the benchmark federal funds rate in a range of zero to 0.25 percent since December 2008 to support the economy, while trimming monthly bond buying to $35 billion from $85 billion starting last year.

Traders see about a 52 percent chance the Fed will increase the rate target to at least 0.5 percent by June next year, up from 40 percent odds at the end of last month, fed funds futures show.

“The market is getting a bit ahead of itself in looking for a faster timetable for pickup in fed funds rates,” Andrew Wilkinson, chief market analyst at Interactive Brokers LLC, said in a phone interview from Greenwich, Connecticut. “I don’t think the employment report changes a lot.”

 

Source: Bloomberg

 

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