Dollar Falls Versus Euro as U.S. Jobs Trail Forecast; Yen Drops

The dollar declined to the lowest level in more than a week against the euro after U.S. employers added fewer jobs in March than forecast, fueling speculation growth in the world’s biggest economy is slowing.

The greenback fell for a third day versus the shared currency on bets the payrolls data will stiffen the Federal Reserve’s determination to maintain bond purchases to spur growth. The yen touched the weakest level since 2009 versus the greenback a day after the Bank of Japan (8301) outstripped forecasts and announced unprecedented economic stimulus measures.

“The payroll data is obviously weaker than expected,” Marc Chandler, New York-based global head of currency strategy at Brown Brothers Harriman & Co., said in a telephone interview. “It reinforces the idea the Fed has the pedal to the metal with its easing. We’ll probably see some more weak economic data.”

The dollar depreciated 0.4 percent to $1.2991 per euro at 5 p.m. in New York. The greenback fell as low as $1.3040, the weakest level since March 25. It gained earlier to $1.2901, approaching its 200-day moving average at $1.2894. Moving averages, which indicate momentum, are seen by some traders as potential turning points. The dollar weakened 1.3 percent versus the euro over the past five days, its first weekly loss since March 15 and its biggest since January.

The U.S. currency climbed 1.3 percent to 97.57 yen and reached 97.83, its strongest level since June 2009. The greenback gained 3.6 percent this week against the yen, snapping a three-week losing streak that was the longest since September. The Japanese currency sank 1.7 percent to 126.79 per euro and reached 127.29, the weakest since Feb. 7.

Dollar Index

The Dollar Index declined 0.1 percent to 82.572 and reached 82.273, the lowest since March 25. The gauge touched 83.494 yesterday, the highest level since Aug. 2.

Futures traders increased their bets that the euro will decline against the dollar, figures from the Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a drop -- so-called net shorts --was 65,701 on April 2, the most since November. Net shorts were 49,095 a week earlier.

Canada’s dollar fell versus most of 31 major peers after the nation unexpectedly had the biggest job loss last month since 2009. Employment fell by 54,500 positions, versus a Bloomberg survey forecast for an increase of 6,500.

The loonie, as the currency is nicknamed for the image of the aquatic bird on the C$1 coin, was down 0.5 percent to C$1.0176 per dollar after sliding earlier as much as 1.1 percent, its biggest intraday drop since June 28.

Asian Currencies

Asian currencies depreciated the most this week since January as policy makers from the Philippines to Japan proposed measures that tend to weaken their exchange rates. The Bloomberg-JPMorgan Asia Dollar Index (DXY) declined 0.3 percent since March 29, the most since the week ending Jan. 25.

South Korea’s won declined to a seven-month low against the dollar as the risk of conflict with North Korea spurred capital outflows. The currency slid 0.7 percent to 1,131.69 and touched 1,131.73, its weakest level since Sept. 6.

“Geopolitical risks have been significantly magnified this week, triggering selloffs of South Korean assets as investors were unsure how the situation would develop under the new leader of the communist state,” said Han Sang Soo, a money manager in Seoul at Samsung Asset Management Co., which oversees $114 billion.

Jobs Report

U.S. payrolls grew by 88,000 workers last month, the least in nine months, after a revised 268,000 gain in February that was higher than first estimated, Labor Department figures showed in Washington. The median forecast in a Bloomberg survey of economists was for a gain of 190,000.

The jobless rate fell to 7.6 percent, from 7.7 percent. The latest figure, the lowest since December 2008, reflected a 496,000 decline in the size of the labor force.

“The payroll report was absolutely dreadful -- the fact that this is not just below expectations, but also below 100,000, is eyebrow-raising,” Ravi Bharadwaj, a senior market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co. (WU), said in a telephone interview. “Weaker-than-expected reports that break the trend add to the likelihood of the Fed holding true to its easing promises.”

Fed Chairman Ben S. Bernanke and his Federal Open Market Committee colleagues are deploying record stimulus through an open-ended expansion of the Fed balance sheet after determining that the benefits from stoking a flagging economy outweigh any risk of financial instability or higher inflation.

Quantitative Easing

The U.S. central bank is buying $85 billion of bonds a month in the third round of its quantitative-easing strategy to spur the economy, which may debase the dollar. While policy makers reiterated after their March meeting the Fed will maintain its purchases until there’s significant improvement in the labor market, Bernanke told reporters the pace may be altered if warranted by a healing economy.

The Fed’s next policy meeting is April 30-May 1.

The euro fell earlier today against the dollar after retail sales in the 17-nation region fell 0.3 percent in February from the previous month and slid 1.4 percent versus a year earlier, the European Union’s statistics office said.

The greenback touched the strongest level against the shared currency yesterday since Nov. 21, $1.2746, after European Central Bank President Mario Draghi said euro area policy will remain accommodative for as “long as needed.” The ECB kept its benchmark interest rate unchanged at 0.75 percent.

Japanese Stimulus

The yen slid for a second day against the dollar after the Bank of Japan said it will increase its bond purchases to 7.5 trillion yen ($77 billion) a month and double the monetary base, which includes cash in circulation, in two years. Policy makers under new Governor Haruhiko Kuroda are working to end 15 years of deflation and two decades of economic stagnation.

“The BOJ announcement was a game changer in a lot of senses,” Vassili Serebriakov, a foreign-exchange strategist at BNP Paribas SA in New York, said in an interview on Bloomberg Television’s “Street Smart” hosted by Trish Regan. “For the first time we’re going to start seeing the BOJ really crowding out domestic Japanese investors from the Japanese government- bond market. Remember, this is how QE is supposed to work.”

To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net

To contact the editor responsible for this story: Robert Burgess at bburgess@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.