Dollar Heads for 4th Weekly Gain Versus Yen Before Jobs Report

By Yasuhiko Seki and Ron Harui

Jan. 8 (Bloomberg) -- The dollar headed for its fourth weekly gain versus the yen, its longest winning run in 10 months, before a U.S. employment report today that economists said will show two years of job losses ended.

The Dollar Index, which tracks the greenback against six major currencies, was set for a second weekly advance, as signs the U.S. recovery is gaining momentum added to speculation the Federal Reserve will end its policy of keeping interest rates near zero. The yen pared losses from a four-month low against the dollar after Japan’s Prime Minister Yukio Hatoyama said rapid moves in the currency market were “not good.”

“With the plethora of data confirming a pick-up of the economy, speculation about an early exit from stimulus in the U.S. is increasing,” said Shuzo Kakuta, a senior foreign- exchange adviser at Tokyo Tomin Bank Ltd. “This will give impetus to the dollar.”

The dollar traded at 93.39 yen as of 7:02 a.m. in London from 93.37 yesterday in New York after earlier rising to 93.77, the strongest since Aug. 28. The currency has gained 0.3 percent this week. The greenback was at $1.4315 per euro from $1.4313. The yen bought 133.68 per euro from 133.58.

U.S. payrolls were unchanged in December after falling 11,000 in the previous month, according to the median estimate of economists in a Bloomberg News survey of economists before today’s Labor Department report.

Fed Rates

The dollar was also bolstered after U.S. regulators including the Fed yesterday warned banks to guard against possible losses from an end to low interest rates.

“It is important for institutions to have robust processes for measuring and, where necessary, mitigating their exposure to potential increases in interest rates,” said the Federal Financial Institutions Examination Council, made up of agencies including the Fed and the Federal Deposit Insurance Corp.

The Fed will raise its benchmark federal funds rate from close to zero in the third quarter of this year, according to a Bloomberg survey of economists undertaken during the first week of December.

The Dollar Index,which IntercontinentalExchange Inc. uses to track the greenback against currencies such as the euro, yen and pound, gained 0.1 percent to 78.02, extending this week’s advance to 0.2 percent.

Japan’s currency pared weekly declines as Hatoyama and Chief Cabinet Secretary Hirofumi Hirano said the government should not comment on foreign-exchange levels. Newly appointed Finance Minister Naoto Kan said yesterday he would welcome a weaker yen.

Hatoyama’s Remarks

“Hatoyama’s remarks muted the impact of yesterday’s comments from Kan,” said Masahide Tanaka, a Tokyo-based senior strategist at Mizuho Trust & Banking Co., a unit of Japan’s second-largest bank. “Kan’s statement yesterday was a New Year’s gift for Japanese exporters.”

Hatoyama told reporters that “as currency stability is desirable, rapid fluctuations are unwelcome.” The Prime Minister also said “the government, at least as far as I am concerned, basically has no need to comment on currencies.”

Cabinet Secretary Hirano said today “it is undesirable for the government to say things that affect markets.” National Strategy Minister Yoshito Sengoku said “it’s not good to say much about whether the exchange rate is high or low.”

Kan later told reporters that foreign-exchange rates should be determined by the markets while saying the government is able to take action on currencies in extreme cases.

‘Gaffes’

“The market is already full of tiffs and gaffes,” said Takashi Kudo, general manager of market information service in Tokyo at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. “It is apparent that there is no shared or uniform opinion on the currency among the government.”

South Korea’s won rose for a seventh day after the central bank signaled interest rates would be raised to reflect a recovery in the economy.

“My thoughts remain unchanged that there’s a gap between the current rate at 2 percent and rates after normalization,” BOK Governor Lee Seong Tae told reporters following a policy meeting today.

Governor Lee on Dec. 10 said the central bank should not wait too long before gradually raising rates, provided the recovery sustains momentum.

Korea’s currency climbed 0.4 percent to 1,130.75 per dollar, posting a 2.9 percent gain this week.

To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.