Dollar Heads for Weekly Loss Versus Euro, Yen Before Jobs Data

The dollar fell against the euro, set for a weekly decline, before a report economists say will show U.S. employers cut jobs last month.

The euro rose against the yen after European retail sales gained for a third month in July. The Swiss franc pared its fourth weekly advance against Europe’s common currency after inflation slowed in Switzerland. The pound was near its lowest in more than a month against the dollar as a report showed U.K. services grew the least in 16 months, fueling concern Britain’s economic recovery will falter.

“Any evidence of a further growth divergence between the U.S. and the euro zone will underpin the euro,” said Gavin Friend, a markets strategist at National Australia Bank in London. “The U.S. numbers have consistently deteriorated in the past few months.”

The dollar traded at $1.2839 per euro at 7:15 a.m. in New York from $1.2825 yesterday. It has declined 0.6 percent this week. The greenback dropped to $1.2856 on Sept. 1, the weakest level since Aug. 19. The U.S. currency was at 84.47 yen from 84.28 yesterday and 85.22 yen a week ago. The euro bought 108.43 yen from 108.09 yen yesterday.

U.S. payrolls fell by 105,000 in August, after dropping by 131,000 the prior month, according to a Bloomberg survey before the Labor Department report today. The jobless rate climbed to 9.6 percent from 9.5 percent, a separate survey showed. Retail sales in the euro area gained 0.2 percent in July, matching the previous month’s gain, another Bloomberg survey showed.

No Support

“Even a moderately positive surprise is probably not going to be suited to support the dollar notably” as investors bet the Federal Reserve will keep interest rates at a record low to support the economic recovery, analysts led by Ulrich Leuchtmann, head of currency strategy at Commerzbank AG in Frankfurt, wrote in a client note today.

The euro area’s economy will probably expand between 1.4 percent and 1.8 percent this year, the European Central Bank said yesterday. That’s up from a previous forecast range of between 0.7 percent and 1.3 percent.

Speaking after the ECB left its benchmark rate unchanged at 1 percent yesterday, President Jean-Claude Trichet said a double-dip recession is “not in the cards” and risks to the inflation outlook are “on the upside.” He will speak in Cernobbio, Italy tomorrow.

Retail Sales

Retail sales in the 16-nation euro area advanced 0.1 percent from June, when they gained 0.2 percent, the European Union’s statistics office in Luxembourg said today. Economists had forecast a gain of 0.2 percent in a Bloomberg News survey. In the year, sales rose 1.1 percent after increasing 1.2 percent in June.

The franc weakened 0.4 percent to 1.3028 per euro, cutting its gain this week to 0.6 percent. It appreciated to 1.2852 on Aug. 31, the strongest level since the euro’s 1999 debut. Switzerland’s currency lost 0.4 percent to 1.0165 per dollar.

Swiss consumer prices increased 0.3 percent from a year earlier after rising 0.4 percent in July, the Federal Statistics Office in Neuchatel said in an e-mailed statement today. That’s the lowest since December 2009. In the month, consumer prices remained unchanged.

The pound was little changed at $1.5406, down 0.8 percent since Aug. 27. Sterling fell to $1.5327 on Aug. 31, the weakest level since July 23.

U.K. Manufacturing

Markit Economics Ltd. and the Chartered Institute of Purchasing and Supply said today their index of U.K. services activity dropped to 51.3 from 53.1 in July, the lowest since April 2009. Economists had predicted a drop to 52. A report yesterday showed the average home price dropped the most in six months in August.

Japan’s currency earlier fell versus Asian counterparts after Ichiro Ozawa, a candidate in a party election this month that will decide Japan’s prime minister, said intervention to stem the yen’s gains is a possibility.

Ozawa warned for a third day of the risks stemming from a strengthening yen and again touched upon the option of market intervention. Ozawa, who heads the largest faction in the ruling Democratic Party of Japan, is challenging Prime Minister Naoto Kan at a party leadership contest on Sept. 14.

“Ozawa is considered to be a type of politician who can play hard in order to achieve a set goal,” said Morio Okayasu, chief analyst in Tokyo at FOREX.com Japan Co., a unit of the online currency trading firm Gain Capital in Bedminster, New Jersey. “If he wins the race, the dollar-yen may see an unexpectedly large rebound.”

Japan hasn’t intervened in the foreign-exchange market since 2004, when the currency was at about 109 per dollar. The Bank of Japan, acting on behest of the Ministry of Finance, sold 14.8 trillion yen ($175 billion) in the first three months of 2004, after record sales of 20.4 trillion yen in 2003.

To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Yasuhiko Seki in Tokyo at yseki5@bloomberg.net

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