BLBG: Dollar Declines as Company Jobs Report Reduces Safety Demand
The dollar declined against the euro as a report showed U.S. companies eliminated fewer jobs last month than economists forecast, reducing demand for safety.
“Investors’ sentiment is skewed toward looking at the bright side,” said Samarjit Shankar, director of strategy for the global markets group in Boston at Bank of New York Mellon. “Any bit of positive news is going to be taken as a reason to increase risk exposure.”
The dollar weakened 0.2 percent to $1.3361 per euro at 8:51 a.m. in New York, from $1.3330 yesterday. The euro appreciated 0.3 percent to 132.15 yen from 131.73. The dollar traded at 98.90 yen, compared with 98.82.
U.S. companies eliminated 491,000 jobs in April after cutting 708,000 in the previous month, ADP Employer Services reported. The median forecast of 28 economists surveyed by Bloomberg was for 645,000 lost jobs.
The Dollar Index, used by the ICE to track the U.S. currency versus the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, dropped 0.3 percent to 83.938.
The European Central Bank will lower the main interest rate by a quarter-percentage point to 1 percent tomorrow, according to the median forecast of 53 economists surveyed by Bloomberg.
The central bank may also announce additional measures to lower borrowing costs, said Sean Callow, senior currency strategist at Westpac Banking Corp. in Sydney.
“The ECB will at least announce something unusual,” Callow said. “In terms of policy measures, they’ll be discussing the types of measures that would potentially weaken the euro.”
‘Drastic’ Measures
The financial crisis needs “drastic” measures, said Athanasios Orphanides, an ECB council member, in Nicosia yesterday. Orphanides and George Provopoulos, another member, have indicated they may support cutting the target rate to less than 1 percent and buying debt to pump money into the economy.
The Federal Reserve’s stress-test results, to be released tomorrow, may show about 10 banks need new capital, people familiar with the matter said.
Bank of America Corp. faces the largest need for new capital among the 19 banks reviewed, according to a person familiar with the matter. Citigroup Inc.’s shortfall is more limited, they said. JPMorgan Chase & Co. doesn’t need a deeper reserve against losses, according to people familiar with that company’s results.
Fed Chairman Ben S. Bernanke warned yesterday in congressional testimony that another shock to the financial system would undercut the central bank’s forecast that the U.S. recession will give way this year to a slow recovery.
