Euro Strengthens Versus Dollar, Yen on Speculation U.S. Payrolls Increased
(Corrects third paragraph to say a delay in quantitative easing would be positive for the dollar.)
The euro strengthened against the dollar and the yen before a report economists said will show U.S. employers increased payrolls in January, damping demand for the safest assets.
The advance trimmed the euro’s weekly decline, after Greece and its creditors struggled to reach an agreement on a deal to reduce the nation’s debt. Japan’s currency traded within one yen of a postwar high versus the dollar, boosting speculation the country will act to weaken it. China’s yuan halted a four-day gain as expansion in its non-manufacturing industries slowed.
“Payrolls will be the big event of the day,” said Jane Foley, a senior currency strategist at Rabobank International in London. “If we get stronger data it would improve risk appetite, which is dollar negative, but at the same time it would push back expectations of further quantitative easing, which is dollar positive.”
The euro climbed 0.2 percent to $1.3176 at 10:51 a.m. London time, paring its decline for the week to 0.3 percent. The common currency was 0.3 percent stronger at 100.46 yen, trimming its weekly drop to 0.9 percent.
The yen traded at 76.24 per dollar. It strengthened to 76.03 two days ago, approaching the post-World War II record of 75.35 set on Oct. 31.
U.S. employers boosted payrolls by 140,000 in January after an increase of 200,000 in December, according to the median estimate of 89 economists surveyed by Bloomberg News. Unemployment probably held at 8.5 percent in January from the previous month, a separate survey shows.
“An increase of 100,000 to 200,000 should be beneficial for risk and see the dollar underperform,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London.
The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, fell 0.2 percent to 78.839.
Private payrolls probably rose by 160,000 in January, after a 212,000 gain the prior month, a separate survey shows. That would be the biggest back-to-back increase since March-April.
The euro headed for a weekly drop against all its major peers with Greece still to conclude an agreement on a second international bailout, including losses for bondholders. The rescue plan, which European officials and creditors say may be wrapped up in coming days, includes a loss of more than 70 percent for debt investors in a voluntary exchange and loans likely to exceed the 130 billion euros ($171 billion) now on the table.
Finance ministers from the four euro-area countries with AAA grades from all three major ratings companies -- Germany, Finland, Luxembourg and the Netherlands -- will meet in Berlin today, a German Finance Ministry spokesman, said yesterday. The ministers won’t brief reporters after the meeting, according to the spokesman, speaking on condition of anonymity.
“The continuing uncertainty in Greece has contributed to a slightly weaker euro this week,” said Michael Derks, chief strategist at broker FXPro Financial Services Ltd. in London.
Morgan Stanley cut its fourth-quarter 2012 forecast for the euro to $1.15 from a previous projection of $1.20, according to a research note published yesterday, saying efforts to control government budgets will push the region into a recession.
Japan’s Finance Minister Jun Azumi said today he will take decisive steps against one-sided moves in the yen if needed. The currency’s level doesn’t reflect economic fundamentals, and falling U.S. interest rates are increasing speculative yen buying, he told reporters in Tokyo. Japan sold the yen on Oct. 31 on concern its advance to a record would hurt exporters.
“Jawboning by the Japanese authorities has increased significantly over the past week,” said Lee Hardman, a currency strategist in London at Bank of Tokyo-Mitsubishi UFJ Ltd. “We judge that the near-term risk of direct intervention is now high.”
The yen has gained 5.8 percent over the past six months, the second-best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 6.3 percent and the euro dropped 2.7 percent.
China’s yuan halted a four-day gain after a report showed expansion in the nation’s non-manufacturing industries slowed.
A purchasing managers’ index declined to 52.9 last month from 56 in December, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in a statement today in Beijing. A reading above 50 indicates growth.
The yuan was little changed from yesterday at 6.3028 per dollar, according to the China Foreign Exchange Trade System.
-- With reporting by Masaki Kondo in Singapore. Editors: Paul Dobson, Nicholas Reynolds
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