BLBG: Dollar Set for Weekly Drop as U.S. Job Losses Expected to Slow
By Yoshiaki Nohara and Ron Harui
Nov. 6 (Bloomberg) -- The dollar headed for a weekly loss against the euro before a government report today forecast to show U.S. employers cut fewer jobs last month, boosting demand for higher-yielding assets.
Japan’s currency was poised for a weekly decline against the euro before data economists said will show German factory orders rose in September for a seventh month. Australia’s currency climbed against 15 of its 16 major counterparts after the central bank said the nation’s economy will expand at more than three times the pace it forecast in August.
“Positive economic data will likely encourage investors to buy higher-yielding assets at the expense of the dollar,” said Toshiya Yamauchi, a Tokyo-based manager in the foreign-exchange margin trading department at Ueda Harlow Ltd. “The pace of non- farm job losses seems to be slowing. The yen tends to be sold along with the dollar when the economic outlook improves.”
The dollar was little changed at $1.4872 per euro at 1:46 p.m. in Tokyo. Yesterday, it touched $1.4917 in New York, the weakest level since Oct. 27. The dollar has dropped 1 percent this week against the euro.
Japan’s currency was at 134.88 per euro from 134.92. The dollar fetched 90.69 yen from 90.71 yen. On the week, the greenback has gained 0.7 percent against the yen.
U.S. Employment
The Labor Department is forecast to report U.S. employers eliminated 175,000 jobs in October after a reduction of 263,000 in the previous month, according to the median estimate of economists in a Bloomberg News survey. The report is due today in Washington.
The yen headed for a 1.7 percent loss this week against the euro as Germany’s Economy Ministry is forecast to report factory orders rose 1 percent in September after gaining 1.4 percent in August, according to the median estimate of economists in a Bloomberg News survey. The data are due today in Berlin.
European Central Bank President Jean-Claude Trichet yesterday indicated unlimited 12-month loans to commercial banks, one of the ECB’s main policies this year to support Europe’s economic recovery, won’t be extended after next month’s operation. The ECB kept its benchmark rate at 1 percent.
“Although his remarks were not particularly hawkish, this presented a positive surprise for the markets, which did not have strong prior expectations that the ECB President would in fact explicitly discuss prospects for an exit strategy and aided sentiment toward the euro,” Emmanuel Ng, an economist in Singapore at Oversea-Chinese Banking Corp., wrote in a research note today.
World’s Central Banks
The world’s biggest central banks are starting to unwind emergency measures introduced earlier this year to stave off a second Great Depression. The Bank of England yesterday slowed the pace of bond purchases. A day earlier, the Federal Reserve outlined the circumstances in which it would be prepared to raise interest rates.
Investors and executives may soon have to do without the flood of liquidity that propped up the economy earlier this year, as concerns about new asset bubbles start to mount. The danger is that mistiming the withdrawal of support could spark swings in currencies and spoil any recovery before it takes root.
“There are all kinds of risks,” said Jim O’Neill, chief global economist at Goldman Sachs Group Inc. in London. “We don’t know how much of the improvement in markets is due to central banks’ largesse, and neither do they. They’re pretty nervous, but they’ve got to get out of it at some stage.”
The Australian dollar climbed after the Reserve Bank of Australia today said the nation’s gross domestic product will expand 1.75 percent this year. In August, the bank forecast a 0.5 percent increase.
‘Ongoing Expansion’
“Growth in business investment and exports is expected to be strong, underpinned by the ongoing expansion of the resources sector,” the central bank said. “The outlook for Australia’s terms of trade has also improved, with some increase now expected over the next year or two.”
The Australian dollar rose to 91.31 U.S. cents from 91.02 cents. It advanced to 82.85 yen from 82.57 yen.
Benchmark interest rates are 3.5 percent in Australia, compared with as low as zero in the U.S. and 0.1 percent in Japan. That makes the South Pacific nation’s assets attractive to investors seeking higher returns.
The pound headed for a second weekly advance against the dollar on speculation a U.K. report will show producer prices rose for a fourth month in October, backing the case for the Bank of England to refrain from lowering interest rates.
The central bank yesterday left its key rate at 0.5 percent and raised the amount of bonds it will buy to 200 billion pounds ($332 billion). That was less than the median forecast of 225 billion pounds in a Bloomberg News survey of economists.
‘Pickup’ in Economy
There are “a number of indicators of spending and confidence” that “suggest that a pickup in economic activity may soon be evident,” the BOE’s Monetary Policy Committee said in a statement. “The committee believes that the prospect is for a slow recovery in the level of economic activity.”
The price of goods at U.K. factory gates rose 0.2 percent in October after a 0.5 percent increase in September, a separate Bloomberg survey showed before the Office for National Statistics releases the data at in London today.
“The BOE is sounding a little more upbeat on economic prospects and has increased its quantitative easing program by less than expected,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “As a result, the pound is finding strength.”
The pound traded at $1.6605 from $1.6583 in New York yesterday, when it climbed to $1.6636, the highest level since Oct. 23. It’s gained 0.9 percent on the week.
To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net
