Yen Declines For Seventh Day Against Dollar Before U.S. Payrolls Report

The yen weakened against all its major counterparts before reports that economists said will show U.S. employers added jobs and a gauge of French manufacturing held at the highest level in nine months. Photographer: Tomohiro Ohsumi/Bloomberg

The yen headed for its longest losing streak against the dollar since July 2005 after a gauge of Chinese manufacturing accelerated and before a report that economists said will show U.S. employers added jobs last month.

Japan’s currency dropped to a 10-month low against the euro on speculation the Bank of Japan will keep interest rates on hold as it deals with the impact of the nation’s March 11 earthquake while the European Central Bank begins a round of increases. South Korea’s won headed for its biggest weekly gain this year.

“In general world economic growth is quite strong,” said Lutz Karpowitz, a currency strategist at Commerzbank AG in Frankfurt. “The negative impacts on Japan’s debt levels from the earthquake are beginning to hit the yen.”

The yen depreciated 0.7 percent, a seventh straight decline, to 83.67 per dollar as of 9:02 a.m. in London, after reaching 83.74, the weakest since Feb. 17. Japan’s currency slid 0.6 percent versus the euro, to 118.44, after touching 118.67, the least since May 13. The euro traded at $1.4154 from $1.4158.

The yen weakened against all 16 of its major counterparts tracked by Bloomberg. It extended its drop against the dollar into a second quarter after losing 2.4 percent in the three months through yesterday, the sharpest quarterly slide since the end of 2009.

Fed Outlook

U.S. employment rose for a sixth month, increasing by 190,000 in March, according to a Bloomberg News survey of economists before the Labor Department report today. China’s Purchasing Managers’ Index increased to 53.4 in March from 52.2 in February, rising for the first time in four months.

Large Japanese manufacturers forecast on average that the yen will trade at 84.20 per dollar in the year through March 2012, according to the Bank of Japan’s Tankan survey released today. Almost three quarters of the responses to the survey came by March 11, the day the magnitude-9.0 earthquake and ensuing tsunami struck the country.

Nomura Holdings Inc., Japan’s biggest brokerage, raised its forecast for the yen, saying domestic investors will sell overseas assets and bring back proceeds for reconstruction. The yen will be at 82.5 per dollar at the end of June, compared with 87.5 projected in January, Nomura analysts led by Taisuke Tanaka wrote in a report today.

‘Significant Possibility’

Federal Reserve Bank of Richmond President Jeffrey Lacker said yesterday the central bank should review whether to reduce its planned purchase of $600 billion in Treasuries, a program known as quantitative easing, because of improving economic data. New York Fed President William Dudley, Philadelphia Fed President Charles Plosser and Dallas Fed President Richard Fisher are scheduled to speak today.

“There’s a significant possibility that the Fed will move closer to exiting from quantitative easing,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “U.S. data have been getting better. The dollar is likely to strengthen.”

The Dollar Index increased for the first time in three days, adding 0.1 percent to 76.073.

The euro was set for a third weekly advance against the Japanese currency on speculation the European Central Bank will raise interest rates to contain inflation.

Euro, Won

The central bank will increase its main refinancing rate by 25 basis points to 1.25 percent on April 7, a Bloomberg survey of economists shows. ECB President Jean-Claude Trichet signaled on March 3 that he may raise rates this month.

“We are broadly constructive on the euro this year, especially as Trichet has now primed the markets for imminent interest-rate hikes,” Morgan Stanley analysts Tim Davis and Calvin Tse wrote in a research note yesterday. “Rate differentials should increasingly play in the euro’s favor.”

The euro has risen 3.3 percent against the yen in the past five days, after adding 8.5 percent in the quarter that ended yesterday.

The South Korean won appreciated against all of its 16 major counterparts as the improved outlook for the global economy boosted confidence in the country’s assets.

Foreign investors increased their holdings of Korean stocks for a 12th day, the longest run of net purchases this year, as the Kospi Index of the nation’s shares climbed 3.4 percent during the period.

“Global stocks, including South Korea’s, have been performing well on expectations for an economic improvement,” said Ha Jun Woo, a currency dealer at Daegu Bank in Seoul. “Stock inflows and the trade surplus are supporting the won.”

The won rose to 1,091.20 per dollar from 1,096.93, set for a 2.1 percent gain for this week.

To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net;

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.