The dollar declined against the yen and the euro before a U.S. payroll report forecast to show the economy lost jobs every month in 2008 and the unemployment rate rose in December to a 16-year high. The yen advanced to the strongest level against the euro in more than two weeks as a global drop in stocks prompted investors to seek the perceived safety of Japan’s currency. The pound gained after the Bank of England cut its main interest rate to an all-time low of 1.5 percent to limit the fallout from Britain’s recession. “The market is staying defensive on the broader dollar ahead of non-farm payrolls and keeping the euro firm versus the dollar,” said Mike Moran, a currency strategist at Standard Chartered Bank in New York. The euro may rise to $1.40 in the next several days, he said. The dollar fell 1.6 percent to 91.14 yen at 10:42 a.m. in New York, from 92.65 yesterday. The U.S. currency weakened 0.6 percent to $1.3730 per euro from $1.3644. The 16-nation euro fell 1 percent to 125.16 yen from 126.42 and touched 124.11, the lowest level since Dec. 22. South Korea’s won was the biggest decliner against the dollar among the 16 most actively traded currencies tracked by Bloomberg as foreign investors sold more South Korean shares than they bought for the first time in seven days. The won, which lost 26 percent last year as Asia’s worst performer, fell 3.1 percent to 1,333.68 per dollar. Bank of England Sterling increased 1 percent to $1.5243 after the BOE lowered its main rate by a half-percentage point, the fourth cut since global coordinated emergency reductions on Oct. 8. Against the euro, the pound appreciated 0.2 percent to 90.18 pence. “It would take something extreme in terms of rate cuts to weaken sterling at the moment,” said Henrik Gullberg, a currency strategist in London at Deutsche Bank AG, the world’s largest foreign-exchange trader. “That’s what the market was expecting.” The yen rose 2.9 percent to 64.15 per Australian dollar and 2.3 percent to 6.74 versus the Mexican peso on speculation the global drop in stocks will encourage investors to 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 4.25 percent in Australia and 8.25 percent in Mexico. U.S. stocks slid for a second day, pushing the Standard & Poor’s 500 Index down 0.4 percent. The Dow Jones STOXX 600 Index of European shares fell 0.8 percent. “New Year optimism appears to have run into the brick wall of deteriorating economic conditions,” wrote London-based Steven Pearson, a foreign-exchange strategist at Merrill Lynch & Co., the investment bank acquired by Bank of America Corp. Trichet on Economy The euro fell 0.2 percent to 1.4993 against the Swiss franc as European Central Bank President Jean-Claude Trichet told Institutional Investor magazine in an interview conducted at the end of 2008 and published yesterday that he sees a “significant” worsening in the economic environment. “It’s clear that we have had a significant deterioration of the real economy,” Trichet told the magazine. The European jobless rate rose to 7.8 percent in November from 7.7 percent the prior month, and the region’s confidence in the economic outlook fell to the lowest level on record, adding to pressure on the ECB to cut interest rates when it meets on Jan. 15. 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 515,000 last month, according to the survey. The report from the Labor Department is due tomorrow. The total number of people receiving benefits rose in the week ended Dec. 27 to 4.6 million, the most since 1982, the Labor Department said today. Initial jobless claims fell to 467,000 in the week that ended Jan. 3.

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