Dollar Heads for Weekly Gain Before Job Report; Franc Weakens

Greece's Prime Minister George Papandreou
George Papandreou, Greece's prime minister. Photographer: Angelos Tzortzinis/Bloomberg

The dollar headed for a weekly advance versus all its major counterparts before a U.S. labor market report forecast to show hiring slowed last month, boosting demand for safer investments.

The euro erased gains versus the greenback after German Chancellor Angela Merkel told reporters Group of 20 leaders meeting in the French resort of Cannes failed to agree on International Monetary Fund resources. The dollar was poised for its biggest five-day advance against the euro in almost two months amid concern Greece is set to default and the sovereign-debt crisis will cause euro-area growth to contract.

“Much will depend on non-farm payrolls today and may overwhelm everything that happens in Greece,” said Henrik Gullberg, a currency strategist in London at Deutsche Bank AG, the world’s largest foreign-exchange trader. “Price action this week suggests euro-dollar is moving one-on-one with equity sentiment.”

The dollar was little changed at $1.3828 per euro at 8:11 a.m. in New York, having risen 2.3 percent this week, the most since the period ended Sept. 9. The greenback traded at 78.05 yen, from 78.06 yen yesterday, on course for a 2.9 percent gain since Oct. 28. The euro was little changed at 107.88 yen.

The Swiss franc declined after central bank Governing Board member Jean-Pierre Danthine said the currency remains “high” and policy makers are ready to weaken it further.

U.S. employers hired 95,000 workers in October down from a 103,000 increase in September, according to the median forecast of economists surveyed by Bloomberg News.

Jobless Rate

The jobless rate was 9.1 percent for a fourth month, the figures may show. The rate has exceeded 8 percent since February 2009, the longest stretch of such levels of unemployment since monthly records began in 1948.

The Dollar Index headed for its first weekly gain since September as Greek Prime Minister George Papandreou struggled to retain power after the largest opposition party rejected his offer to form a national government, raising the prospect of elections that may delay aid needed to prevent default.

Opposition leader Antonis Samaras rebuffed sharing power with Papandreou and called on the premier to step down. Papandreou scrapped a referendum on an accord with the European Union to avert a split in his party before a confidence vote scheduled for today.

European services and manufacturing output contracted more than initially estimated in October, London-based Markit Economics said today. A euro-area composite index based on a survey of purchasing managers fell to 46.5 from 49.1 in September. That’s a 28-month low.

European Central Bank President Mario Draghi yesterday unexpectedly reduced interest rates by a quarter percentage point to 1.25 percent, and said Europe is heading toward a “mild recession.”

‘Bad Headlines’

“Really bad headlines out of Greece, to the point they may even consider leaving the euro-zone at some point, weigh on the currency,” said Chris Walker, a foreign-exchange strategist at UBS AG in London. “The euro’s trading on headlines out of Greece, and that’s masking fundamental divergences.”

The Dollar Index, which IntercontinentalExchange Inc. uses to track the U.S. currency against those of six trading partners, has risen 2.3 percent this week to 76.777. It was little changed today.

The franc snapped a two-day gain after Danthine said in Geneva late yesterday that the currency remains strong even at a rate of 1.20 per euro.

The Swiss National Bank on Sept. 6 imposed a cap of 1.20 francs per euro after the currency surged to a record, threatening exports and increasing deflation risks.

‘Committed to Its Floor’

“Danthine said the SNB is committed to its floor,” UBS’s Walker said. “They may raise the floor if conditions deteriorate or deflationary risks return. Over the longer term, they are committed to that policy, so there’s a bias to buy euro-Swiss on the back of that.”

The franc dropped 0.7 percent to 1.2218 per euro. It strengthened to a record 1.0075 on Aug. 9.

The Australian dollar fell for the first time in three days after the Reserve Bank lowered its forecasts for economic growth and inflation forecasts for the next two years as global financial turmoil makes businesses more reluctant to hire.

The RBA said it saw growth of 4 percent in the 12 months to June 30, 2012, down from its Aug. 5 estimate of 4.5 percent. Consumer prices will rise 2 percent, from a previous prediction of 2.5 percent, and underlying inflation is predicted at 2.5 percent from a previous 3 percent, the central bank said.

The revisions are “bearish, but the reaction is relatively muted given the market had already expected that would happen,” said Thomas Harr, head of Asian currency strategy at Standard Chartered Plc in Singapore. “The RBA has clearly shifted to an easing bias.”

The Australian currency weakened 0.3 percent to $1.0389, and slid 0.3 percent to 81.07 yen.

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