Dollar Falls 3rd Day Versus Yen on Fed Stimulus Prospects

The dollar slid for a third day against the yen before U.S. data this week forecast to show manufacturing activity and hiring remained weak, adding to the case for further monetary easing by the Federal Reserve.

The Dollar Index traded near a three-month low after Fed Chairman Ben S. Bernanke said at an annual forum in Jackson Hole, Wyoming that joblessness was a “grave concern” and that further bond purchases under quantitative easing shouldn’t be ruled out. Labor Department data on Sept. 7 may show the U.S. added fewer jobs in August. Australia’s dollar slid while the yen climbed amid signs of slowing growth in China.

“Weak U.S. data will now be seen as raising the chance of QE, which is U.S. dollar negative,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington, referring to asset purchases known as quantitative easing. “Non-farm payrolls is certainly the most important event for this week.”

The dollar slid 0.2 percent to 78.23 yen as of 10:12 a.m. in Tokyo from the close on Aug. 31, when it touched 78.19, the lowest since Aug. 13. The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trade partners, was at 81.264 from the 81.208 close last week, when it reached 80.964, the lowest level since May 22. U.S. markets are closed today for a holiday.

The Australian dollar dropped 0.5 percent to $1.0266 and lost 0.7 percent to 80.33 yen. Japan’s currency gained against all its 16 major peers, rising 0.2 percent to 98.34 per euro.

U.S. Economy

The Institute for Supply Management’s manufacturing index was probably at 50 in August, the dividing line between expansion and contraction in August, according to the median estimate of economists surveyed by Bloomberg News before the Tempe, Arizona-based group releases its figures tomorrow. It was at 49.8 in July.

Economists in a separate Bloomberg poll forecast U.S. employers added 125,000 jobs last month, fewer than the 163,000-position increase in July, before the Labor Department reports the data this week. The jobless rate will remain at 8.3 percent, they projected. U.S. unemployment has stayed at or above 8 percent since February 2009. It was 4.4 percent in October 2006.

Bernanke told central bankers and economists at the Kansas City Fed’s annual economics symposium on Aug. 31 that “nontraditional policies” shouldn’t be ruled out if economic conditions warrant them. He emphasized that a third round of bond purchases is an option, and repeated the Federal Open Market Committee’s last statement that the central bank “will provide additional policy accommodation as needed” to spur growth.

Jobs Numbers

The Fed chief’s speech came two weeks before the next meeting of the policy-setting FOMC. Many policy makers at the previous gathering said additional stimulus probably will be needed soon unless the economy showed a “substantial and sustainable strengthening,” according to minutes of their July 31-Aug. 1 meeting.

“If the jobs numbers come in weak, that would significantly heighten expectations of QE3,” said Kengo Suzuki, a currency strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest bank by market value. “The dollar may test lower over the near term.”

The greenback fell 0.8 percent in the past month, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The yen declined 0.5 percent in the same period, while the Australian dollar dropped 3.9 percent.

Retail Sales

The so-called Aussie touched a five-week low of $1.0256 before data on Australian retail sales and amid concern growth is slowing in China, the nation’s biggest trading partner.

Sales probably grew 0.2 percent in July from the previous month, when they rose 1 percent, according to the median estimate of economists surveyed by Bloomberg before the Bureau of Statistics releases data today.

A Purchasing Managers’ Index of Chinese manufacturing fell to 49.2 in August from 50.1 the previous month, the National Bureau of Statistics and China Federation of Logistics and Purchasing said on Sept. 1. HSBC Holdings Plc and Markit Economics will release a separate PMI index of Chinese manufacturing today.

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