Dollar Drops to Three-Week Low Versus Yen as U.S. Job Gains Trail 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 of its most-traded counterparts except the Mexican peso and Canadian dollar as the jobless rate unexpectedly rose to 9.8 percent, underscoring the Federal Reserve’s decision last month to buy government bonds to spur employment. The Swiss franc was the top performer, after Norway’s krone, as U.S. stocks fluctuated and investors sought an alternative to the dollar.

“The job numbers today vindicated the Fed and their pumping of liquidity into the economy,” said John Doyle, a strategist in Washington at currency-trading firm Tempus Consulting Inc. “The correlation of risk for the dollar broke down today, so you have risk stable but equities and the dollar losing.”

The greenback tumbled 1.5 percent to 82.53 yen, the weakest level since Nov. 15, at 5 p.m. in New York, from 83.82 yesterday. It dropped for the first week since October, losing 1.9 percent.

The dollar depreciated 1.5 percent to $1.3414 per euro, from $1.3209, and reached $1.3438, the lowest since Nov. 23. It fell against the common currency for the first week in a month, declining 1.3 percent. The euro was at 110.73 yen, unchanged from yesterday.

The Standard & Poor’s 500 Index rose in its last half-hour to end the day up 0.3 percent after declining as much as 0.4 percent.

Highest Since April

Payrolls increased by 39,000, 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. The jobless rate reached the highest since April, from 9.6 percent in October.

The Fed drew criticism domestically and abroad after 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 the move 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.”

Franc Climbs

The U.S. 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.

Switzerland’s currency surged as much as 2 percent to 97.27 centimes per dollar, the strongest level since Nov. 12, and gold for February delivery added as much as 2 percent to $1,417 an ounce as investors sought haven assets other than the greenback.

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 1.4 percent to 79.153.

The currencies of Canada and Mexico, which on average ship about three-quarters of their exports to the U.S., were the two worst performers among the dollar’s major peers. The Canadian dollar declined 0.1 percent to C$1.0039 per greenback, and the Mexican peso weakened 0.1 percent to 12.3369 per dollar.

‘Slaves to the U.S.’

“With Mexico and Canada, they are slaves to the U.S., so today is just a little bit of an adjustment,” said Andrew Wilkinson, senior market analyst at Interactive Brokers Group LLC in Greenwich, Connecticut. “This week risk takers acted like marathon runners sprinting for the finish line, and today’s report has served to give them a cramp. Expectations have been pared after great risk-taking throughout the week.”

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 euro 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.

The euro will fall to $1.30 in a year amid uncertainties about sovereign debt in Europe and more bailouts, according to Alan Ruskin, global head of Group of 10 foreign-exchange strategy at Deutsche Bank AG in New York.

It “obviously doesn’t look like a particularly bold call at this juncture, but pointing toward minor dollar gains eventually,” Ruskin said today in an interview on Bloomberg Radio’s “Bloomberg On the Economy” with Michael McKee and Sara Eisen.

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

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