BLBG: Dollar Poised for Weekly Drop as U.S. Job Losses Seen Slowing
By Anchalee Worrachate and Yoshiaki Nohara
Nov. 6 (Bloomberg) -- The dollar headed for a weekly loss against the euro before a government report forecast to show U.S. employers cut fewer jobs last month, boosting demand for higher-yielding assets.
The U.S. currency declined most versus the South Korean won and the Australian dollar. The euro was poised for a weekly gain versus the yen after German factory orders rose for a seventh month. The Australian dollar climbed against all but one of the 16 major currencies after the central bank said the nation’s economy will expand at more than three times the pace forecast in August.
“The dollar should retain its weakening bias into the jobs data,” said Geoffrey Yu, a currency strategist in London at UBS AG. “Sentiment on the economic outlook seems to be stabilizing. People are expecting a slowdown in job losses, and you will need a really bad number to surprise the market.”
The dollar was at 90.61 yen at 7:23 a.m. in New York, compared with 90.71 yen yesterday, and was up 0.6 percent this week. It traded at $1.4877 per euro, compared with $1.4871 yesterday, when it touched $1.4917, the weakest level since Oct. 27. The yen was at 134.86 per euro, compared with 134.92.
The U.S. currency has dropped 1.1 percent against the euro this week, driving IntercontinentalExchange Inc.’s Dollar Index down 0.8 percent.
The Labor Department may say today 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 84 economists in a Bloomberg survey. The report is scheduled for release at 8:30 a.m. in Washington.
‘Refocus’ on $1.50
“Good data are more likely to put pressure on the dollar as foreign-exchange markets are still being guided by global risk aversion,” Antje Praefcke, a currency strategist at Commerzbank AG in Frankfurt, wrote today in a report. “If the labor-market report does not bring any negative surprises, the improved sentiment on the financial markets is likely to support euro-dollar. In that case attention could soon refocus on the $1.50 mark.”
Stocks and commodities gained on speculation the global economy is stabilizing, fanning demand for higher-yielding assets and the currencies to buy them. Copper climbed 0.8 percent and the MSCI World Index of 23 developed countries rose 0.1 percent.
The dollar may also extend losses as Group of 20 finance chiefs push for Asian nations to allow their currencies to appreciate when they meet in Scotland this weekend, according to UBS, the world’s second-largest foreign-exchange trader.
While exchange rates won’t be on the agenda, “many nations will seek to bring it up,” Yu wrote in a research report today.
Euro-Yen
The euro headed for a weekly gain versus the yen as Germany’s Economy Ministry said factory orders rose 0.9 percent in September after gaining 2.1 percent in August.
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 today.
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 said it will expand bond purchases by less than economists forecast. A day earlier, the Federal Reserve outlined the circumstances in which it would be prepared to raise interest rates.
Aussie Gains
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.
“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 91.62 U.S. cents from 91.02 cents. It advanced to 83.01 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, making the nation’s assets attractive to investors seeking higher returns.
To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net
