Dollar Poised for Weekly Drop as U.S. Job Losses Seen Slowing

By Anchalee Worrachate and Yoshiaki Nohara

Nov. 6 (Bloomberg) -- The dollar fell, heading for a weekly loss against the euro, before a government report today forecast to show U.S. employers cut fewer jobs last month, boosting demand for higher-yielding assets.

The U.S. currency declined most compared with the South Korean won and the New Zealand dollar, sending the Dollar Index 0.1 percent lower. The euro was poised for a weekly gain versus the yen before data economists expect to show German factory orders rose for a seventh month. The Australian dollar climbed against all but two of its 16 major counterparts after the central bank said the nation’s economy will expand at more than three times the pace it forecast in August.

“The dollar should retain its weakening bias into the jobs data,” said Geoffrey Yu, a currency strategist in London at UBS AG. “Sentiment on the economic outlook seems to be stabilizing. People are expecting a slowdown in job losses, and you will need a really bad number to surprise the market.”

The dollar dropped to 90.45 yen as of 8:33 a.m. in London, from 90.71 yen in New York yesterday, paring its weekly gain to 0.4 percent. It was at $1.4877 per euro from $1.4871 yesterday, when it touched $1.4917 in New York, the weakest level since Oct. 27. The yen was at 134.57 per euro from 134.92.

The dollar has dropped 1.1 percent this week against the euro. The Labor Department may say today U.S. employers eliminated 175,000 jobs in October after a reduction of 263,000 in the previous month, according to the median estimate of 84 economists in a Bloomberg News survey. The report is scheduled for release at 8:30 a.m. in Washington.

‘Re-focus on $1.50’

“Good data is more likely to put pressure on the dollar as foreign-exchange markets are still being guided by global risk aversion,” Antje Praefcke, a currency strategist at Commerzbank AG in Frankfurt, wrote today in a report. “If the labor-market report does not bring any negative surprises, the improved sentiment on the financial markets is likely to support euro- dollar. In that case attention could soon re-focus on the $1.50 mark.”

The U.S. currency may also extend losses as Group of 20 finance chiefs push for Asian nations to allow their currencies to appreciate when they meet in Scotland this weekend, according to UBS, the world’s second-largest foreign-exchange trader.

While exchange rates won’t be on the agenda, “many nations will seek to bring it up,” Yu wrote in a research report today.

Euro-Yen

The euro headed for a weekly gain versus the yen. Germany’s Economy Ministry may say factory orders rose 1 percent in September after gaining 1.4 percent in August, according to the median estimate of economists in a Bloomberg News survey. The data are due for release at noon in Berlin.

European Central Bank President Jean-Claude Trichet yesterday indicated unlimited 12-month loans to commercial banks, one of the ECB’s main policies this year to support Europe’s economic recovery, won’t be extended after next month’s operation. The ECB kept its benchmark rate at 1 percent.

“Although his remarks were not particularly hawkish, this presented a positive surprise for the markets, which did not have strong prior expectations that the ECB President would in fact explicitly discuss prospects for an exit strategy and aided sentiment toward the euro,” Emmanuel Ng, an economist in Singapore at Oversea-Chinese Banking Corp., wrote today.

The world’s biggest central banks are starting to unwind emergency measures introduced earlier this year to stave off a second Great Depression. The Bank of England yesterday slowed the pace of bond purchases. A day earlier, the Federal Reserve outlined the circumstances in which it would be prepared to raise interest rates.

Aussie Gains

The Australian dollar climbed after the Reserve Bank of Australia today said the nation’s gross domestic product will expand 1.75 percent this year. In August, the bank forecast a 0.5 percent increase.

“Growth in business investment and exports is expected to be strong, underpinned by the ongoing expansion of the resources sector,” the central bank said. “The outlook for Australia’s terms of trade has also improved, with some increase now expected over the next year or two.”

The Australian dollar rose to 91.72 U.S. cents from 91.02 cents. It advanced to 83.02 yen from 82.57 yen.

Benchmark interest rates are 3.5 percent in Australia, compared with as low as zero in the U.S. and 0.1 percent in Japan, making the nation’s assets attractive to investors seeking higher returns.

Pound’s Weekly Gain

The pound headed for a second weekly advance against the dollar on speculation a U.K. report will show producer prices rose for a fourth month in October.

The central bank yesterday left its key rate at 0.5 percent and raised the amount of bonds it will buy as part of its quantitative-easing program to 200 billion pounds ($332 billion), less than the 225 billion pounds forecast in a Bloomberg News survey of economists.

There are “a number of indicators of spending and confidence” that “suggest that a pickup in economic activity may soon be evident,” the BOE Monetary Policy Committee said in a statement. “The committee believes that the prospect is for a slow recovery in the level of economic activity.”

The price of goods at U.K. factory gates rose 0.2 percent in October after a 0.5 percent increase in September, a separate Bloomberg survey showed before the Office for National Statistics releases the data at in London today.

“The BOE is sounding a little more upbeat on economic prospects and has increased its quantitative easing program by less than expected,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “As a result, the pound is finding strength.”

The pound traded at $1.6618 from $1.6583 in New York yesterday, when it climbed to $1.6636, the highest level since Oct. 23. It gained 1 percent on the week.

To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net