Dollar Heads for Weekly Gain Before Payrolls Data; Forint Rises

The dollar headed for weekly gains versus the yen and the euro before a U.S. report forecast to show employers added the most jobs in three months, adding to signs the world’s largest economy is gaining momentum.

The euro traded about 0.1 percent from the weakest in 11 years against the yen after reports showed confidence in the European economic outlook fell to a two-year low and German factory orders dropped by the most in almost three years. The euro is poised for a fifth weekly loss against the dollar, the longest run since February 2010. Hungary’s forint strengthened for a second day against the euro.

“Signs of strength in the U.S. economic recovery at the time Europe is in recession may at the margin help support the dollar against the euro,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “We may see a weaker dollar against higher-yielding currencies such as the Australian, New Zealand and Canadian dollars.”

The dollar was little changed at $1.2798 per euro at 6:54 a.m. in New York, having gained 1.2 percent this week. It earlier rose to $1.2764, the strongest since September 2010. The greenback was unchanged at 77.12 yen, having risen 0.3 percent this week. The euro was little changed at 98.71 yen after sliding to 98.48 yesterday, the least since December 2000.

U.S. Jobs

U.S. employers hired 155,000 workers last month, after adding 120,000 in November, according to a Bloomberg News survey before today’s Labor Department report. That would be the most since September. The jobless rate rose to 8.7 percent from 8.6 percent, a separate survey showed. U.S. companies added 325,000 workers in December, the most in records going back to 2001, ADP Employer Services said yesterday.

“The news coming from the U.S. has been OK,” said Derek Mumford, a director in Sydney at Rochford Capital, a currency-risk management company. “We’re seeing just generally some U.S. dollar strength, which is mainly reflected in the euro.”

IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, was little changed today to 80.930 after rising to 81.062, the highest level since Jan. 11, 2011.

The euro headed for a weekly loss against 14 of its 16 major counterparts after the European Commission said its index of executive and consumer sentiment in the euro area declined to 93.3 in December from a revised 93.8 in the previous month.

The unemployment rate held at 10.3 percent in November, a separate report showed. German factory orders, adjusted for seasonal swings and inflation, slipped 4.8 percent in November from the prior month, when they increased 5 percent, the Economy Ministry said. That’s the biggest drop since January 2009.

‘Negative Sentiment’

“There’s still negative sentiment surrounding the euro, and it’s likely to weaken further,” Bank of Tokyo-Mitsubishi’s Hardman said. “Today’s data will likely confirm declining business and consumer confidence. The market has almost fully priced in a recession in Europe. The question is how deep and prolonged that will be.”

The euro fell yesterday after France sold 10-year bonds at an average yield of 3.29 percent, compared with 3.18 percent at a sale on Dec. 1. The bid-to-cover ratio, or the number of bids received for each unit of debt sold, fell to 1.64 from 3.05. France’s credit outlook was lowered by Fitch Ratings on Dec. 16.

Spain is scheduled to sell bonds maturing in 2015 and 2016 on Jan. 12. Italy will auction debt the following day.

Merkel, Sarkozy

German Chancellor Angela Merkel will meet French President Nicolas Sarkozy on Jan. 9 in Berlin to talk about increasing fiscal coordination among euro-area states before the European Union leaders’ summit at the end of the month.

Japanese Finance Minister Jun Azumi said today he understands the weakening of the euro against the yen will have a significant impact on companies that export their goods to the region. Japan sold the yen three times last year as its strength threatened to derail an export-led recovery.

The forint pared its weekly decline as Hungary’s Prime Minister Viktor Orban met central bank President Andras Simor amid a dispute about the bank’s independence that threatens the country’s bailout.

Orban met with Simor and Economy Minister Gyorgy Matolcsy, the premier told reporters in Budapest today. Hungary needs a “quick” deal on aid with the International Monetary Fund and the European Union and is ready to discuss the conditions, Tamas Fellegi, the minister assigned to lead the aid talks, told reporters yesterday.

“Early forint action shows that markets are happy with this” meeting, Simon Quijano-Evans, an economist at ING Groep NV in London, wrote in a research report today. “It would be great to say that after 18 months of noise, we are seeing light at the end of the tunnel. All the more so since Orban and Simor are apparently meeting now.”

Hungary’s currency gained 0.7 percent to 316.82 per euro, trimming this week’s decline to 0.6 percent.

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