Yen Rises on Growth Concern as ECB Disappoints

The dollar fell before a government report that economists said will show the pace of U.S. hiring failed to bring the jobless rate below 8 percent, a level it has held above for more than three years.

The U.S. currency weakened against 12 of its 16 major counterparts as gains in European stocks damped demand for the safest assets. The euro strengthened for the first time in three days against the dollar after retail sales in the 17-nation region unexpectedly increased in June. New Zealand’s dollar gained after Standard & Poor’s affirmed the nation’s credit rating and said the outlook was stable.

“In the past four months, the payrolls data has fallen below expectations,” said Simon Smith, chief economist at FXPro Group Ltd. in London. “There could also be a bit of repositioning in the euro” after yesterday’s decline, he said.

The dollar weakened 0.8 percent to $1.2280 per euro as of 7:27 a.m. in New York, paring this week’s gain to 0.3 percent. The U.S. currency was little changed at 78.26 yen. The euro gained 0.9 percent to 96.12 yen after falling to 94.12 yen on July 24, the lowest level since November 2000.

U.S. employers hired 100,000 workers last month after adding 80,000 in June, according to economists surveyed by Bloomberg News. The jobless rate held at 8.2 percent for a third month, a separate survey showed. The reading has been higher than 8 percent since February 2009.

The Federal Reserve refrained from boosting monetary stimulus at a two-day meeting that ended on Aug. 1, while indicating that a sluggish economy may prompt further steps to encourage growth.

QE3 Possible

The dollar will fall against the yen “if the U.S. jobs data turn out weak,” said Kumiko Gervaise, an analyst at Research Institute Ltd. in Tokyo. “The market will start pricing in the possibility of QE3 from the Fed in September,” she said, referring to a third round of asset purchases known as quantitative easing.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, dropped 0.6 percent to 82.80. The Stoxx Europe 600 Index of shares gained 1.6 percent.

The euro appreciated versus the dollar and the yen after the European Union’s statistics office said retail sales gained 0.1 from May, when they rose 0.8 percent. Economists forecast a decline of 0.1 percent, according to a Bloomberg News survey.

The 17-nation currency tumbled yesterday after European Central Bank President Mario Draghi failed to convince investors that policy makers were doing enough to contain the debt crisis.

‘Initial Disappointment’

Today’s move is “a reflection that investors are starting to shrug off some of the initial disappointment following yesterday’s ECB meeting,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “We remain skeptical it will prove a sustainable solution.”

The euro has fallen 4.4 percent in the past six months, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen gained 0.8 percent and the dollar strengthened 3.3 percent.

The euro may extend gains versus the dollar as investors reconsider Draghi’s statements yesterday, according to Morten Helt, a senior analyst at Danske Bank A/S in Brondby, Denmark.

“Draghi was fairly clear that the ECB could, and most likely would, reactivate its bond purchases in the secondary market if one or several countries ask the EFSF to buy its government bonds,” Helt wrote in a note to clients, referring to the region’s bailout fund known as the European Financial Stability Facility.

“It appears more likely that this will happen than not in our view” he said. “A strong and coordinated policy response will push the euro higher. The market is not yet fully priced for this.”

Kiwi Gains

New Zealand’s dollar rose for a second day versus the greenback after S&P affirmed the nation’s credit rating, citing its fiscal flexibility, resilient economy and policy institutions conducive to swift and decisive policy reform.

“The kiwi was slightly supported after S&P affirmed New Zealand’s rating,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “I still think the risk is to the downside. The kiwi will still be affected by concerns over the global economy.”

New Zealand’s currency climbed 0.6 percent to 81.47 U.S. cents, and gained 0.6 percent to 63.76 yen.

The Dollar Index may extend this week’s advance after a “bullish breakout” yesterday above a level of so-called resistance at 83.01, according to Royal Bank of Canada, citing trading patterns.

The advance is “underpinning topside momentum,” George Davis, chief technical analyst for fixed-income and currency strategy in Toronto at the bank’s RBC Dominion Securities unit, wrote in a research note yesterday. He cited 83.63 as the next level of resistance.

Resistance refers an area on a chart where technical analysts anticipate sell orders to be clustered.

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