Dollar General Takes Family Dollar Offer to Shareholders

The dollar strengthened against its higher-yielding peers as a measure of currency-market volatility reached its strongest level since February.

Australia’s dollar fell below its 200-day moving average for the first time since March after a report showed consumer confidence eroded this month. The greenback reached an almost six-year high versus the yen on speculation U.S. employment data tomorrow will back the case for the Federal Reserve to raise interest rates next year.

There’s been “a significant lift in volatility, and levels have moved up substantially,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “The dollar continues to look well-bid across the piece and people are scrambling to profit from that. Most crosses are favorable for dollar gains.”

The U.S. currency appreciated 0.7 percent to 91.37 U.S. cents per Australian dollar at 7:25 a.m. time. It gained 0.4 percent against the South African rand and 0.5 percent on India’s rupee, the currencies of two developing countries with higher benchmark borrowing costs.

The greenback rose 0.4 percent to 106.63 yen after touching 106.80, the highest since September 2008. It was little changed at $1.2943 per euro after reaching $1.2860 yesterday, the strongest since July 2013. The shared currency advanced 0.5 percent to 138.04 yen.

Deutsche Bank AG’s Currency Volatility Index jumped to 7.8 percent, the highest since Feb. 6 on a closing-price basis. The measure was as low as 4.93 percent on July 21.

An Australian consumer confidence index for September fell 4.6 percent to 94 from the previous month, a Westpac Banking Corp. and Melbourne Institute survey showed today in Sydney. A figure below 100 indicates pessimists outnumber optimists.
Dollar Bias

“The U.S. dollar has had a really nice rally against everything else,” said Chris Weston, chief market strategist in Melbourne at IG Australia, a unit of IG Group. “The euro and the pound are so oversold that now people are looking to a positive U.S. dollar bias against the Aussie.”

The Aussie will probably weaken to 90 cents if it closes below 92 for the first time since March, he said.

A gauge of dollar strength climbed before a Labor Department report tomorrow which economists said would show first-time applications for U.S. unemployment benefits fell by 2,000 to 300,000 in the week ended Sept. 6.
Rate Watch

The Fed, which meets Sept. 16-17, is considering the timing of its first rate increase since 2006. It has held the benchmark interest-rate target in a range of zero to 0.25 percent since 2008 to support the economy.

There’s a 61 percent chance the Fed will raise the target to at least 0.5 percent by July 2015, futures trading shows. The likelihood was 52 percent at the start of this month.

“The Fed is likely to raise rates by mid-2015, while other countries like Japan are forced to still ease,” said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “The dollar will be bought as the U.S. is likely to be the sole winner.”

The ForexSQ Dollar Spot Index, which tracks the greenback against a basket of 10 leading currencies, added 0.2 percent to 1,047.20. It earlier touched 1,049.20, the most since July 2013.