Euro Weakens With Yen as Haven Demand Wanes Before U.S. Payrolls

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  • 19-member single currency falls against most major peers
  • Yen was third quarter's best performer amid stocks rout

The euro weakened alongside the yen as investors turned away from haven currencies before a U.S. payrolls report that may help determine when the Federal Reserve increases interest rates.

The 19-member currency headed for a third weekly decline versus the dollar, its longest losing streak since March, as stocks around the world gained. The euro and yen were the best-performing currencies against the greenback last quarter as investors sought safety amid a rout in and stock and commodity markets. The median forecast of economists surveyed by Bloomberg showed employers added 201,000 jobs in September.

“We’ve tentative improvement in risk sentiment,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The euro and yen have been trading as safe havens in this recent period of risk aversion and obviously the fact that we’re seeing some easing of those conditions is resulting in euro and yen strength reversing. The payrolls report is not going to significantly change market expectations for tightening."

The euro weakened 0.3 percent to $1.1159 at 6:53 a.m. New York time. It was little changed at 134.14 yen. Japan’s currency depreciated 0.2 percent to 120.21 per dollar.

Rate Outlook

The dollar whipsawed this week as investors prepared to scrutinize the Labor Department’s monthly employment report. Fed Bank of San Francisco President John Williams said Thursday risks to the economy from developments abroad haven’t worsened and domestic conditions remain positive, while repeating his call to raise interest rates this year.

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, was little changed at 1,213.82. It rose 2.8 percent in the third quarter.

Futures put the probability of Fed liftoff by December at 44 percent, from as high as 64 percent on Sept. 16, the day before the Fed’s latest policy decision was announced. The calculation is based on the assumption that the effective fed funds rate will average 0.375 percent after the first increase.

“We will be closely watching today’s wages data,” Yann Quelenn, a market analyst at Swissquote Bank SA in Gland, Switzerland. “We remain bearish on the euro-dollar. In addition, the dollar is driven higher as there are still important U.S. recovery expectations.”