Aug. 4 (Bloomberg) -- The yen touched an eight-month high against the dollar on speculation growth in the world's biggest economy is slowing and the Federal Reserve may signal additional stimulus measures at next week's policy meeting. Japan's currency was mixed versus most of its 16 major counterparts before U.S. reports this week that economists said will show service industries grew at a slower pace and companies cut workers for a second month, spurring demand for safer assets. The yen pared its gain as a report today showed U.S. companies added more jobs than forecast in July and U.S. equity futures rose. "If the Fed is on the verge of moving closer toward further quantitative easing, that's been the focus," said Camilla Sutton, a Bank of Nova Scotia currency strategist in Toronto. "Eighty-five is an important level in terms of intervention." The yen traded at 85.80 per dollar at 8:47 a.m. in New York from 85.79 yesterday. Japan's currency strengthened to 113.28 per euro from 113.50. The dollar traded at $1.3204 per euro from $1.3231. Japan's currency has appreciated versus all of its major peers this year as speculation the global recovery will falter stoked demand for the safest assets. It climbed to 85.33 earlier, the highest since Nov. 27, when the yen touched levels last seen in 1995. Japanese Finance Minister Yoshihiko Noda told parliament yesterday that currency rates should be determined by financial markets. Jobs, Service Index Data from ADP Employer Services show companies in the U.S. added 42,000 jobs in July after a 19,000 increase the prior month. Economists forecast an increase of 30,000 jobs, according to the median estimate of 37 economists surveyed. An index of U.S. service businesses, which covers about 90 percent of the economy, fell to 53 last month from 53.8 in June, the Institute for Supply Management will say today according to a Bloomberg survey. U.S. companies cut 60,000 workers in July, a separate survey showed before the Aug. 6 report. U.S. reports yesterday showed consumer spending, home sales and factory orders were all weaker than economists projected. Speculation that the Fed will resume bond buying has increased since Chairman Ben S. Bernanke said July 21 that the outlook "remains unusually uncertain." The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, was little changed at 80.686, after falling yesterday to the lowest level since April. 'Dollar's Fortunes' "The risk of quantitative easing is central to the dollar's fortunes at the moment," said Daragh Maher, deputy head of global foreign-exchange strategy at Credit Agricole Corporate & Investment Bank in London. "The dollar has been behaving like the main funding currency for carry trades so if stocks fall," the dollar gains, he said. The euro also fell, after trading at a three-month high of $1.3262 yesterday, as data showed Italy's services industries contracted in July. An index compiled by Markit Economics fell to 49.6 for July. A reading above 50 indicates expansion. "There's a bout of risk-aversion-type sentiment creeping in and that is what's partially driving the euro," said Neil Jones, head of European hedge fund sales at Mizuho Corporate Bank Ltd. in London. "Italy's data is on the softer side and that might slightly weigh as well." Yen Gains Japan's currency has advanced 11 percent this year against its developed-world counterparts, the biggest gainer of the group, according to Bloomberg Correlation-Weighted Currency Indices. The euro has dropped 7.7 percent, and the dollar has strengthened 1 percent. The yen's current level per dollar is stronger than the 90.16 average rate that was estimated by Japan's large manufacturers for the six months to March 2011 in the Bank of Japan's Tankan survey released July 1. The currency typically strengthens in times of financial turmoil as Japan's trade surplus makes the currency attractive as it means the nation does not have to rely on overseas lenders. The U.S. payrolls report this week may boost demand for the currency as a refuge, according to Bank of America Merrill Lynch. "We expect upward pressure on the yen to intensify in August," said Tomoko Fujii, senior director and currency strategist in Tokyo. "The U.S. employment report tends to set a tone for the month, and this Friday's July employment report is likely to underscore the bleak labor market picture." Nissan Motor Co., Japan's third-largest carmaker, is "very concerned" about the yen's strength, Chief Operating Officer Toshiyuki Shiga told reporters today in Yokohama, Japan. Toyota Motor Corp., the world's biggest carmaker, raised its full-year profit forecast today as sales in North America recovered. --With assistance from Candice Zachariahs in Sydney, Makiko Kitamura in Tokyo and Ron Harui in Singapore. Editor: Dave Liedtka

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