Dollar Heads for Weekly Loss Against Yen Before U.S. Payrolls

By Ron Harui and Ye Xie

Jan. 9 (Bloomberg) -- The dollar headed for its first weekly loss against the yen in three weeks before a U.S. payroll report that may show the economy lost jobs every month in 2008 and the unemployment rate rose in December to a 16-year high.

The yen was poised to snap a four-week losing streak versus the euro as declines in most global equity markets prompted investors to seek the perceived safety of Japan’s currency. The euro was set for second weekly drop against the British pound after the Bank of England cut interest rates yesterday.

“There’s a high likelihood that the jobs data will be very bad,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe General SA, France’s second-largest bank by market value. “It’s a reason to sell the dollar.”

The dollar traded at 91.35 yen at 8:35 a.m. in Tokyo, after falling 1.6 percent yesterday and touching 90.85, the lowest since Jan. 2. The greenback was at $1.3694 per euro, following a 0.4 percent drop. Europe’s currency traded at 125.09 yen after declining 1.2 percent and touching 124.11, the lowest level since Dec. 22.

The U.S. currency may weaken to 90 yen and $1.38 per euro today, Saito said.

The Norwegian krone and the Mexican peso declined yesterday as crude oil dropped. The krone fell as much as 1.8 percent to 7.0238 per dollar, the biggest intraday drop since Dec. 26, and the peso retreated as much as 1.8 percent to 13.6897.

Crude oil for February delivery declined 2.2 percent to $41.70 a barrel yesterday, following a 12 percent drop on Jan. 7. Norway is the world’s fifth-largest oil supplier, while Mexico ranks as the third-largest supplier of crude to the U.S.

Sterling’s Gain

Sterling traded at $1.5225 after the BOE lowered its main rate by half a percentage point, the fourth cut since global coordinated emergency reductions on Oct. 8. Against the euro, the pound gained 0.1 percent to 89.95 pence. It’s about 8 percent stronger since touching 98.029 pence on Dec. 30, the weakest since the euro’s 1999 debut.

“The market was happy with continued cuts from the Bank of England,” said Sacha Tihanyi, a Toronto-based currency strategist at Scotia Capital Inc., a unit of Canada’s third- biggest bank. “Sterling is oversold, and the euro is overbought. Further lower euro-sterling is where the risk lies.”

The yen rose 3.3 percent to 6.668 per Mexican peso and 1.3 percent to 9.4359 versus the South African rand yesterday on speculation investors will sell higher-yielding assets and pay back low-cost loans in Japan’s currency. The Bank of Japan’s 0.1 percent target lending rate compares with 8.25 percent in Mexico and 11.5 percent in South Africa.

The Standard & Poor’s 500 Index of U.S. equities has fallen 2.4 percent this week, while the MSCI Asia-Pacific Index of regional shares is down 0.1 percent.

Wal-Mart’s Profit

Wal-Mart, the world’s biggest retail chain, said yesterday that fourth-quarter profit will be less than earlier forecast after sales at stores open at least a year rose 1.7 percent last month, missing analysts’ estimates.

The U.S. unemployment rate likely jumped in December to 7 percent, the highest level since 1993, according to the median forecast of 70 analysts surveyed by Bloomberg News. Non-farm payrolls probably fell by 525,000 last month, according to the survey. The Labor Department is scheduled to release the data at 8:30 a.m. in Washington.

The total number of people receiving unemployment benefits rose in the week ended Dec. 27 to 4.6 million, the most since 1982, the Labor Department said yesterday. Initial jobless claims fell to 467,000 in the week that ended Jan. 3.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net