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Dollar Weakens Before Jobs Data, Euro Gains on German Outlook

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Dec. 3 (Bloomberg) -- The dollar weakened for the third consecutive day against the euro and fell versus the yen before a report that economists said will show U.S. employers added workers last month.

Europe’s common currency erased its weekly loss against the greenback as the Bundesbank raised its 2010 growth forecast for Germany. Governments “must go as far as possible and be as effective as possible” in dealing with the debt crisis, European Central Bank President Jean-Claude Trichet said in Paris today, a day after policy makers delayed their exit from stimulus measures. The Norwegian krone rose versus all but one of its 16 most-traded peers after the nation’s unemployment rate stayed at the lowest level since May.

“A good payrolls number will favor the risk story and may be negative for the dollar,” said Jeremy Stretch, executive director of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “The risk story has proved to be relatively useful” for higher-yielding assets, he said.

The dollar depreciated 0.3 percent to $1.3254 per euro at 7:39 a.m. in New York, from $1.3209 yesterday, and $1.3242 a week ago. It reached $1.2969 on Nov. 30, the strongest level since Sept. 15. Against the yen, the dollar weakened by 0.2 percent to 83.67, from 83.82. The euro was at 110.89 yen, compared with 110.73 yen, down 0.4 percent for the week.

Employment in the U.S. increased by 150,000 last month, according to the median forecast of 87 economists surveyed by Bloomberg News, bringing the rise so far this year to 1.02 million. The unemployment rate probably held at 9.6 percent, according to the survey median.

Dollar Index Falls

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, declined 0.3 percent to 80.042, falling for the third consecutive day.

Germany’s gross domestic product will expand 3.6 percent in 2010, 2 percent in 2011 and 1.5 percent in 2012, the Frankfurt-based central bank said in its biannual economic outlook today. In June, it predicted growth of 1.9 percent this year and 1.4 percent next year, though in October it said the economy may expand “more than 3 percent” in 2010.

Norway’s krone appreciated 0.8 percent to 6.0400 per dollar and was 0.5 percent stronger against the euro at 8.0036.

The nation’s registered jobless rate was 2.7 percent in November, the Oslo-based Labor and Welfare Organization said on its website today. Analysts had forecast a rate of 2.7 percent, according to the median of six estimates surveyed by Bloomberg.

Debt Crisis Concern

Gains by the euro may be limited as some investors bet Trichet hasn’t done enough to calm the region’s debt crisis and that growth in Germany won’t be repeated in weaker euro-area nations as austerity measures hobble their economic recoveries.

While the central bank kept its refinancing rate at a record low of 1 percent and extended an emergency loan program to combat “acute” market tensions, Trichet said at yesterday’s press conference in Frankfurt that policy makers will keep mopping up extra liquidity from its bond purchases, disappointing some traders who were expecting it to start so-called quantitative easing.

“Trichet swatting everyone’s concerns away by saying they shouldn’t be concerned is no remedy in my book,” said Neil Mellor, a currency strategist in London at Bank of New York Mellon Corp., the world’s biggest custodian of financial assets. “Fundamentally nothing has changed. The benefit of the doubt must still lie with a weaker euro.”

Standard & Poor’s said yesterday it may cut Greece’s credit rating as proposed European Union rules threaten to hurt bondholders. Greece’s ‘BB+’ long-term sovereign rating was placed on “CreditWatch” with negative implications, S&P said in a statement.

South Korea’s won rose as overseas investors raised holdings of the nation’s shares for a third day.

The won appreciated 0.9 percent to 1,138.55 per dollar, up 1.9 percent in the week.

To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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