By Stanley White
Dec. 5 (Bloomberg) -- The dollar headed for a fifth weekly decline against the yen, its longest losing streak in four years, before a U.S. government report that economists say will show the unemployment rate rose to the highest level since 1993.
The greenback was also poised for a second weekly loss versus the euro on speculation the jobs report will give the Federal Reserve more reason to cut interest rates. The euro fell against the yen this week after the European Central Bank announced the biggest rate cut in its 10-year history yesterday.
“The market is moving to a broadly weak trend for the dollar,” said Hideki Amikura, deputy general manager of foreign exchange in Tokyo at Nomura Trust and Banking Co., a unit of Japan’s largest brokerage. “Non-farm payrolls numbers are likely to be ugly. This should pressure the dollar to trade lower.”
The dollar bought 92.29 yen as of 7:29 a.m. in London from 92.23 yen late yesterday in New York, on course for a 3.4 percent decline this week. The euro was at $1.2787 from $1.2777 yesterday and up from $1.2691 at the end of last week. The euro traded at 118.04 yen, down 2.6 percent from Nov. 28. The British pound was at $1.4678, losing 4.6 percent this week.
The dollar may fall to 88 yen this month, Amikura said.
Chinese Yuan
The Chinese yuan headed for a 0.6 percent weekly decline to 6.8792 per dollar, on speculation U.S. Treasury Secretary Henry Paulson’s calls for a stronger currency won’t stop China from weakening it to support exporters. The currency gained as much as 0.2 percent today as Chinese officials said during the talks that the nation remained committed to currency reform and a “stable” yuan.
U.S. payrolls shrank by 333,000 workers in November after a drop of 240,000 in the previous month, according to the median forecast of 73 economists surveyed by Bloomberg News. The jobless rate jumped to 6.8 percent, the highest level in 15 years, a separate survey showed. The Labor Department will release the report at 8:30 a.m. in Washington.
“Some are selling the dollar ahead of the payroll report,” said Brian Dolan, chief currency strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey. “You have a perfect storm building for the dollar.”
Fed Chairman Ben S. Bernanke yesterday urged the use of more taxpayer funds to prevent home foreclosures in a speech in Washington. Futures on the Chicago Board of Trade showed yesterday 64 percent odds the Fed will lower its 1 percent target rate to 0.25 percent by its next meeting on Dec. 16, compared with a 52 percent chance on Dec. 3.
Car Trouble
General Motors Corp. Chief Executive Rick Wagoner told lawmakers yesterday he would accept strict conditions for a U.S. loan to stay afloat, including a promise to return the money and file for bankruptcy if his company doesn’t fulfill the terms. GM and Chrysler LLC told Congress on Dec. 2 they need as much as $15 billion to survive until next month. Ford Motor Co. has requested a credit line of as much as $9 billion.
“The market’s attention will be drawn to non-farm payrolls and hearings on a bailout of the U.S. auto sector,” Masafumi Yamamoto, head of foreign-exchange strategy for Japan at Royal Bank of Scotland Plc in Tokyo and a former Bank of Japan currency trader, wrote in a research note today. “This may cause stocks to fall and place pressure on the yen to rise.”
Rate Cuts
The ECB lowered its main refinancing rate by 0.75 percentage point to 2.5 percent. The median forecast of economists surveyed by Bloomberg was for a reduction of half a percentage point.
The pound fell as much as 1.4 percent to 87.25 pence per euro yesterday, the weakest level since the 15-nation currency’s 1999 debut, after the Bank of England lowered its target lending rate by a full percentage point to 2 percent. The pound was last quoted at 87.15 pence per euro, on course for a 5.3 percent weekly decline.
Sweden’s krona fell 2.8 percent to 10.5758 per euro this week to trade near a record low after the Riksbank cut the benchmark rate by 1.75 percentage points to 2 percent yesterday, the largest reduction in 16 years. New Zealand’s dollar declined 2.8 percent to 53.37 U.S. cents after the central bank cut rates by a record 1.5 percentage points to 5 percent.
“The beneficiary out of all these rate cuts is the yen,” said Toru Umemoto, chief currency analyst in Tokyo at Barclays Capital, a unit of Britain’s second-biggest lender. “Japan’s rates are already 0.3 percent, and they’re not going to decline further. The yen is the safest among major currencies because the financial crisis has largely excluded Japan.”
Japan’s currency may rise to 85 by March 31, he said.
The yen has been the best performer against the dollar and the euro this year out of all the currencies tracked by Bloomberg as investors pared so-called carry trade purchases of higher-yielding assets. Japan’s benchmark rate is the lowest among major economies, making it a popular funding currency.
Some people are buying the yen because they view it as a relatively safe currency, Japanese Economic and Fiscal Policy Minister Kaoru Yosano told reporters at a briefing today. The currency has gained 21 percent against the dollar and 38 percent versus the euro this year.
To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.net
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