The dollar dropped to the lowest in three weeks against the currencies of its major trading partners on concern weaker economic data will drive the Federal Reserve to keep interest rates at a record low to bolster the recovery. The U.S. currency weakened after a private survey showed employment increased by 38,000 last month, the smallest gain since September. It extended declines after a measure of manufacturing output in May declined more than forecast. The Japanese currency rose against all of its 15 major counterparts except for the Swiss franc as investors sought haven assets. “Weak data equals a weak dollar,” said Ray Attrill, a senior currency strategist at BNP Paribas SA in New York. It’s not surprising to see the dollar weaken substantially on the basis of the data.” IntercontinentalExchange Inc.’s Dollar Index, which measures the greenback against the currencies of six trading partners including the yen and the euro, fell 0.3 percent to 74.386 at 10:08 a.m. in New York, after declining to 74.36, the least since May 6. The dollar dropped 1 percent to 80.73 yen, from 81.52 yen yesterday. It fell 1.8 percent versus the franc to 83.88 centimes and reached 83.83 centimes, the weakest since at least 1971. The euro rose 0.3 percent to $1.4433. Swiss Strength The Swiss franc strengthened against all 16 of its major counterparts as data showed retail sales rose in April at the fastest rate in two years, boosting speculation the Swiss National Bank may raise borrowing costs. The currency gained for the first time in three days versus the euro. Retail sales climbed 7.5 percent in the year after a 0.2 percent drop in March, the most since April 2009. The franc strengthened most against the Swedish krona and reached a record versus the pound. Employment increased last month after a revised 177,000 gain in April, according to figures from ADP Employer Services. The median estimate in the Bloomberg News survey called for a 175,000 advance for May. The Labor Department will release May unemployment figures June 3. Economists project employers added 180,000 jobs last month, according to the median estimate in a Bloomberg News survey. Factory Output The Institute for Supply Management’s factory index fell to 53.5 in May from 60.4 the prior month, the Tempe, Arizona-based group said today. Economists projected the gauge would drop to 57.1, according to the median forecast in a Bloomberg News survey. Estimates of the 83 economists polled ranged from 53 to 60. The Fed has kept its benchmark interest rate at zero to 0.25 percent and won’t raise it until the first quarter of 2012, according to a Bloomberg News survey. Central banks in other developed-nations have begun tightening policy following the recession, including the European Central Bank and the Bank of Canada. European officials are trying to prevent the euro region’s first sovereign default as investors dump Greek bonds on concern the government won’t be able to meet its obligations. Investors may be offered preferred status, higher coupon payments or collateral as inducements to buy bonds replacing Greek debt maturing between 2012 and 2014, said two people with knowledge of discussions, who declined to be identified because the talks are in progress. So-called negative incentives are also under consideration, such as cutting off old Greek bonds from eligibility for use as collateral with the European Central Bank, the people said. “Until there’s clarity on where the debate is going, you will get this volatility in the euro,” said Paul Robson, a senior foreign-exchange strategist at Royal Bank of Scotland Group Plc in London. “Clearly there’s still lots to discuss and it’s just taken the edge off the euro, which had rallied pretty hard over the last few days.” To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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