By Ben Levisohn and Inyoung Hwang Jan. 8 (Bloomberg) -- The dollar fell from a four-month high against the yen as U.S. employers unexpectedly eliminated jobs last month, boosting speculation that the Federal Reserve may extend stimulus measures. The yen rose against all of its most-traded counterparts including the Australian and New Zealand dollars on speculation the payrolls report will reduce demand for higher-yielding assets. The greenback dropped the most against the euro in more than two weeks. “The headline doesn’t sit well with the dollar,” said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut. “People had been bracing for a flat to positive number. It puts expectations for a Fed rate hike on ice.” The dollar slid as much as 0.7 percent to $1.4415 per euro, the biggest intraday decline since Dec. 23, before trading at $1.4381 at 9:16 a.m. in New York, compared with $1.4308 yesterday. The dollar dropped 0.9 percent to 92.51 yen, from 93.37. It earlier touched 93.77, the highest level since Aug. 28. The euro fell 0.4 percent to 133.05 yen, from 133.58. U.S. employers eliminated 85,000 jobs in December after a revised addition of 4,000 in the previous month, the Labor Department said today. The median estimate of 76 economists in a Bloomberg News survey was for no change in nonfarm payrolls. The unemployment rate held at 10 percent. The traded-weighted Dollar Index, which the ICE futures exchange uses to track the greenback against currencies including the euro, yen, pound and Swiss franc, rose 1.7 percent on Dec. 4, when the Labor Department reported an unexpected drop in U.S. unemployment. Dollar and Fed The index had fallen 17 percent from the 2009 peak reached in March as evidence of a global economic rebound spurred investors to buy higher-yielding assets funded with dollars. The index rose 4 percent in December on speculation the Fed was moving closer to withdrawing stimulus measures. At its Dec. 15-16 meeting, Fed officials debated increasing and extending its stimulus program should the economy weaken, according to minutes released Jan. 6. A few favored such a move while one policy maker discussed a reduction. The target rate for overnight lending between banks was held at a range of zero to 0.25 percent. The Fed said in its statement at the end of its December meeting that deterioration in the labor market “is abating.” Europe’s unemployment rate unexpectedly increased in November to 10 percent, the highest in more than 11 years, the European Union statistics office said today. The yen rose earlier today against the dollar after Japan’s Prime Minister Yukio Hatoyama said rapid foreign-exchange moves were “not good” a day after the newly appointed Finance Minister said he would welcome a weaker yen. “Hatoyama’s remarks muted the impact of yesterday’s comments from Kan,” said Masahide Tanaka, a Tokyo-based senior strategist at Mizuho Trust & Banking Co., a unit of Japan’s second-largest bank. “Kan’s statement yesterday was a New Year’s gift for Japanese exporters.” To contact the reporters on this story: Ben Levisohn in New York at blevisohn@bloomberg.net; Inyoung Hwang in New York at ihwang7@bloomberg.net

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