Dollar Holds Drop Versus Euro Before U.S. Jobs Data

Thursday, 03 November 2011 11:59 PM

The dollar held a two-day drop versus the euro before data forecast to show U.S. jobs growth slowed and the unemployment rate was unchanged, supporting the case for the Federal Reserve to consider monetary easing.

Europe’s common currency climbed versus the greenback Thursday, paring this week’s drop, after Greek Prime Minister George Papandreou signaled he won’t call for a referendum on a bailout plan. The yen is set for its first five-day drop against the dollar in three weeks after Japan on Oct. 31 sold its currency to curb appreciation. Australia’s dollar declined against the yen after its central bank cut forecasts for economic growth and inflation for the next two years.

“If you get a better-than-expected payrolls result, but it’s not good enough to bring the unemployment rate down, then that will probably keep expectations that there may be further policy easing down the track alive,” said John Kyriakopoulos, Sydney-based head of currency strategy at National Australia Bank Ltd. That “tends to hurt the U.S. dollar,” he said.

The dollar traded at $1.3807 per euro as of 10:03 a.m. in Tokyo, after falling 0.6 percent to $1.3823 yesterday. It trimmed this week’s gain to 2.4 percent. The European currency bought 107.72 yen from 107.90 and has risen 0.4 percent since Oct. 28. The yen traded at 78.02 per dollar from 78.06 yesterday and 75.82 last week, after touching a postwar record high of 75.35 on Oct. 31.

Weaker U.S. Employment

U.S. payrolls climbed by 95,000 workers last month after a 103,000 increase in September, according to the median forecast of economists surveyed by Bloomberg News ahead of Friday’s data from the Labor Department. The jobless rate was 9.1 percent for a fourth consecutive month, the report may also show.

The MSCI Asia Pacific Index of stocks rose 1.7 percent, its first advance this week.

The 17-nation euro yesterday advanced after Papandreou scrapped a referendum on an accord with the European Union after it split his party, roiled markets and drew warnings from euro leaders that it may cost Greece its membership in the 17-nation currency area.

“A referendum is now off the table and it seems that the package agreed to last week will pass through Greece’s parliament,” David Watt, a senior currency strategist at Royal Bank of Canada’s RBC Capital Markets unit in Toronto, wrote in a note to clients. “The recent shockwave has left its mark. The euro is still well below the post-EU Summit high.”

The euro has risen 0.2 percent in the past week, according to Bloomberg Correlation-Weighted Indexes. That pared its drop over the past year to 3.6 percent, the worst among the 10 developed-nation currencies tracked, while the dollar fell 0.9 percent and the yen rose 1.3 percent in the same period.

Focus on Greece

Athens will remain a focal point for policymakers and investors today as Papandreou faces a confidence vote in parliament. Greece’s largest opposition party has rebuffed his overtures to form a national government, raising the prospect of elections.

“There are downside risks to euro,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation’s biggest lender. “You will still get more softening of the data in Europe and it’s easy to come up with a scenario where you get some problem in Greece or in Italy and that drags down the euro.”

The euro may drop to about $1.32 by year-end, he said.

A euro-area composite index based on a survey of purchasing managers in the services and manufacturing industries fell to 47.2 in October from 49.1 in September, London-based Markit Economics is forecast to say today according to economists in a Bloomberg survey. That would be the lowest since July 2009.

Australia’s dollar weakened after the Reserve Bank predicted growth of 4 percent in the 12 months to June 30, 2012, down from its Aug. 5 estimate of 4.5 percent. Consumer prices will rise 2 percent over the period, from a previous prediction of 2.5 percent, the central bank said.

The Aussie weakened 0.2 percent to $1.0396 and fell 0.3 percent to 81.10 yen.

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The dollar held a two-day drop versus the euro before data forecast to show U.S. jobs growth slowed and the unemployment rate was unchanged, supporting the case for the Federal Reserve to consider monetary easing. Europe s common currency climbed versus the greenback...
Thursday, 03 November 2011 11:59 PM
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