08.07.201305:55:56UTC+00Dollar index touches July 2010 high on speculation fed to taper

The Dollar Index advances to its best shape in three years before Federal Reserve Chairman Ben S. Bernanke speaks this week amid speculation indications of economic development will impel the central bank to slow stimulus.

The greenback reached a five-week high against the yen ahead of minutes of the Fed’s June 18-19 meeting where Bernanke said policy makers may start slowing bond purchases this year. Data last week displayed U.S. employers added more jobs than economists calculated. The euro held a two-day retreat before European Central Bank President Mario Draghi speaks in Brussels today and Germany releases data on industrial production.

Fed Tapering

The U.S. Labor Department reported on July 5 that payrolls hiked by 195,000 in June for a second-straight month. A Bloomberg News survey of economists forecast a gain of 165,000 after a previously reported 175,000 rise in May. The jobless rate stayed at 7.6 percent.

ECB Policy

In Europe, Draghi is due to speak in Brussels today after he made an unprecedented pledge last week to keep interest rates low for an extended period. The ECB’s monetary policy stance will “remain accommodative” for as long as needed to spur growth, he said July 4 after a policy meeting.

Brussels Meeting

Euro-area finance ministers meet in Brussels today where they are expected to discuss aid to Greece. Greek Finance Minister Yannis Stournaras said yesterday the government probably will reach a deal with international creditors.

The dollar has gained 7.8 percent in the past six months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 5.5 percent in the same period while the yen lost 8.9 percent, the biggest loser.

The yen remained lower after data showed Japan’s current account surplus narrowed more than economists estimated. The surplus in May was 540.7 billion yen ($5.3 billion), the Ministry of Finance said in Tokyo. That compared with a 750 billion yen surplus in April and 600 billion yen predicted in a Bloomberg survey.

The Bank of Japan will start a two-day meeting on July 10. Governor Haruhiko Kuroda unveiled unprecedented stimulus measures in April to achieve 2 percent inflation in two years.

The BOJ is likely to reiterate its price goal this week, according to Kheim Do, the head of Asian multi-asset strategy at Baring Asset Management.

“We’re long Japanese equities and short the yen, so I think that we’ll stay with that trade for at least another 6-12 months because the reflation policies in Japan are still being implemented,” Do said in a Bloomberg Television interview.

A short position is a bet an asset will decline.