The dollar strengthened to an almost nine-month high against theeuro after European Central Bank (ECB) President Mario Draghisignaled monetary policy will diverge from the U.S. for an extendedperiod of time.

The U.S. currency rose against the majority of its 16 main peersas unemployment claims dropped, pushing the average over the pastmonth to an eight-year low. Russia's ruble declined to athree-month low as political tension in Ukraine deepened.Australia's dollar fell by the most in a month against its U.S.counterpart as traders revived bets the nation's central bank willcut interest rates after unemployment jumped.

“He's mentioned a few times the divergence in monetarypolicies—in a way, he's trying to send the euro lower, he justwants to remind the market [that] fundamentals are not supportingthe euro,” Charles St-Arnaud, London-based senior economist atNomura Securities International Inc., said of Draghi. “The initialjobless claims numbers were excellent. They're back to pre-crisislevels.”

The dollar advanced 0.2 percent to $1.3354 per euro at 10:55a.m. New York time after touching $1.3333 yesterday, the strongestsince Nov. 8. The euro fell 0.1 percent to 136.50 yen. Japan'scurrency weakened 0.1 percent to 102.22 per dollar.

The Bloomberg Dollar Spot Index, which tracks the greenbackagainst 10 developed-market peers, rose 0.2 percent to 1,022.30after gaining to 1,024.67 yesterday, the highest since Feb. 13.

St-Arnaud recommends investors buy the dollar against the euro,Aussie, and New Zealand dollar.

Aussie, Yuan

The Aussie dropped the most among the dollar's 31 main peers asthat nation's jobless rate jumped to 6.4 percent last month from 6percent in June, the statistics bureau said. The number of peopleemployed fell by 300, compared with the forecast for an increase of13,200 in a Bloomberg News survey.

Australia's dollar slid 0.9 percent to 92.74 U.S. cents afterlosing 1 percent, the biggest decline since July 3. It earliertouched 92.59 cents, the lowest since June 5.

China's yuan strengthened for a fourth day as economistspredicted tomorrow's government report will show exports climbed 7percent from a year earlier in July, compared with 7.2 percent inJune. The trade balance will be in surplus for the fifth month,another survey showed. The yuan yesterday rose beyond the centralbank's fixing for the first time since its trading band was doubledto 2 percent on March 17.

The currency climbed 0.02 percent to close at 6.1619 per dollar,China Foreign Exchange Trade System prices show. It touched 6.1561earlier, the strongest level since March 17. The closing level was0.08 percent stronger than today's reference rate of 6.1670,according to data compiled by Bloomberg.

The euro weakened as Draghi said the risks to the economicrecovery in the region are increasing from the conflict in Ukraineand from recent economic data that have been disappointing.

“Heightened geopolitical risks, as well as developments inemerging-market economies and global financial markets, may havethe potential to affect economic conditions negatively,” Draghisaid at a press conference in Frankfurt today after the ECB keptits main interest rates unchanged. “We are strongly determined tosafeguard the firm anchoring of inflation expectations over themedium to long term.”

Italy, Russia

Headwinds facing the recovery in the 18-nation euro area areintensifying, after Italy slipped back into recession and thestandoff between Russia and the U.S. and its allies escalated.Draghi has in the past said an external shock to the economy thatendangers the inflation outlook could be a trigger for broad-basedasset purchases, or quantitative easing.

In the U.S., the Federal Reserve is on pace to end itsunprecedented bond buying in October, with the first interest-rateincrease since 2006 expected by July, based on futurescontracts.

The ECB policy meeting came against the backdrop of mountingpolitical crisis. Russia has massed troops along its border withUkraine, and President Vladimir Putin retaliated yesterday againstEuropean Union and U.S. sanctions by ordering restrictions on foodimports.

The ruble fell for a sixth day against the central bank's targetbasket of dollars and euros, sliding 0.2 percent to 41.7731 andtouching 41.9409, lowest since May 6.

The dollar gained as jobless claims decreased by 14,000 to289,000 in the week ended Aug. 2, from 303,000 in the prior period,a Labor Department report showed today in Washington. The medianforecast of 47 economists surveyed by Bloomberg called for anincrease to 304,000.

The Aussie has gained 5.6 percent this year, the most among 10developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, as the nation's benchmark rate of 2.5 percentattracts investors. The yen added 4.3 percent, the U.S. dollar rose1.1 percent and the euro fell 2.2 percent.

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