BLBG: Dollar Drops Against Yen as U.S. Employers Added Fewer Jobs Than Forecast
The dollar dropped to a three-week low versus the yen as U.S. payrolls added less than one-third as many jobs as forecast last month, keeping unemployment near a 26-year high and spurring speculation the recovery is faltering.
The greenback fell against all but two of its most-traded counterparts as the jobless rate rose to 9.8 percent, underscoring the Federal Reserve’s decision last month to pump more money into the economy to spur employment. The currencies of Canada and Mexico, which count the U.S. as the biggest buyer of their exports, were the two worst performers.
“The number is so horribly off target, it’s really pretty ugly,” said Boris Schlossberg, director of research at the online currency trader GFT Forex in New York. “It puts a huge cap on dollar-yen right now, downward pressure on that pair back down to 82 at least.”
The dollar tumbled 1 percent to 82.95 yen at 10:03 a.m. in New York, from 83.82 yesterday, and touched 82.53 yen, the lowest level since Nov. 15. It fell 1.1 percent to $1.3358 per euro, from $1.3209, and reached $1.3374, the lowest in a week. The euro traded at 110.66 yen, compared with 110.73 yesterday.
Payrolls increased by 39,000 positions, less than the most pessimistic projection of economists surveyed by Bloomberg News, after a revised 172,000 increase the prior month, Labor Department figures showed today in Washington. The jobless rate reached the highest since April, from 9.6 percent in October, while hours worked and earnings stagnated.
The unemployment rate has held at 9.5 percent or higher since July 2009. It reached 10.1 percent in October 2009, the most since June 1983.
Quantitative Easing
The Fed drew criticism domestically and abroad when it said Nov. 3 it will buy $600 billion in Treasuries through June in a tactic called quantitative easing. German Finance Minister Wolfgang Schaeuble suggested it aimed to erode the value of the greenback, and the four top Republicans in Congress wrote Bernanke expressing concern it introduced “significant uncertainty regarding the future strength of the dollar.”
The employment report “is more a comment on QE,” said Steven Englander, head of Group of 10 currency strategy at Citigroup Inc. in New York. “This shifts the burden of proof onto those who say the Fed’s not going to go ahead with their program. That’s why you’re having such a big impact in the foreign-exchange market.”
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners including the euro and yen, fell below 80 for the first time in a week. The gauge slid 1.1 percent to 79.447.
Peso, Canada Dollar
The Canadian currency slipped 0.1 percent to C$1.0039 per U.S. dollar, and the Mexican peso fell 0.4 percent to 12.3715 per dollar.
The euro erased a weekly loss against the greenback as the Bundesbank raised its 2010 growth forecast for Germany. The Norwegian krone rose versus most of its 16 most-traded peers after the nation’s unemployment rate stayed at the lowest level since May.
The 16-nation currency lost 6.9 percent versus the dollar last month, the most since May, amid speculation Europe’s sovereign-debt crisis will spread from Greece and Ireland through the region.
European Central Bank President Jean-Claude Trichet assured investors yesterday that policy makers will delay their withdrawal of stimulus measures and continue its bond-buying program. The bank bought Portuguese and Irish debt again today.
Greece’s Credit Rating
Standard & Poor’s said yesterday it may cut Greece’s credit rating as proposed European Union rules threaten to hurt bondholders. Greece’s ‘BB+’ long-term sovereign rating was placed on “CreditWatch” with negative implications, S&P said in a statement.
Germany’s gross domestic product will expand 3.6 percent in 2010, 2 percent in 2011 and 1.5 percent in 2012, the Frankfurt- based central bank said today in its biannual economic outlook. In June, it predicted growth of 1.9 percent this year and 1.4 percent next year.
Norway’s krone gained 1.4 percent to 6.0021 per dollar and was 0.2 percent stronger versus the euro at 8.0257. The nation’s registered jobless rate held at 2.7 percent in November, the Oslo-based Labor and Welfare Organization said on its website. Analysts in a Bloomberg survey forecast 2.7 percent.
Gains by the euro may be limited as some investors bet Trichet hasn’t done enough to calm the region’s debt crisis and that growth in Germany won’t be repeated in weaker euro-area nations as austerity measures hobble their economic recoveries.
The greenback fell versus the euro Dec. 1 and stocks rose as the Institute for Supply Management’s factory index showed U.S. manufacturing expanded for a 16th straight month in November. ADP Employer Services data showed American companies boosted payrolls by 93,000 jobs, more than forecast.
The U.S. central bank’s Beige Book business survey, also released Dec. 1, showed five Fed banks said the economy grew “at a slight to modest” rate, five others reported a “somewhat stronger pace” and two said conditions were “mixed.”
To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
