The dollar fell, trimming weekly gains against the euro and yen, before data that’s forecast to support the case for low borrowing costs and show U.S. employers failed to create enough jobs to reduce the jobless rate. Switzerland’s franc weakened from a record against the euro after the Swiss National Bank said it won’t exclude any measures to curb the currency’s advance. The yen strengthened against the dollar a day after Japan moved to weaken it, trimming the currency’s biggest weekly drop in four months, as tumbling stocks stoked demand for safer assets. U.S. payrolls probably climbed by 85,000 in July after an 18,000 increase in June that was the smallest this year, a Bloomberg survey showed. “Today’s report should confirm that labor market conditions are very difficult, and that should cement expectations for further monetary easing from the Fed,” which would weaken the dollar, said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The very credible threat and strong signal from the SNB is holding the Swiss franc back.” The dollar was 0.4 percent weaker against the euro at $1.4152 at 7:56 a.m. in New York, cutting its gain this week to 1.7 percent. It declined 0.5 percent to 78.54 yen, trimming its weekly gain to 2.3 percent, which is still the most since the week beginning April 1. Sinking Stocks The franc weakened 0.8 percent to 1.08505 per euro, dropping from a record 1.07112 reached earlier. It declined 0.4 percent against the dollar to 76.69 centimes. The Stoxx Europe 600 Index sank 1.3 percent and the MSCI Asia Pacific index of stocks dropped 3.7 percent. Standard & Poor’s 500 futures were little changed after the U.S. benchmark plunged almost 5 percent yesterday. The U.S. jobless rate is predicted to stay at 9.2 percent after rising in each of the previous three months, according to a Bloomberg survey of 84 economists before today’s report. Concern the economic recovery will be cut short led U.S. equities to their biggest slump since February 2009 yesterday. Slowing growth puts more pressure on Federal Reserve policy makers meeting next week to try to steer the world’s largest economy away from another recession at a time when inflation is also accelerating. “The big risk to the dollar is that the Fed will present a more dovish stance next week,” Hardman said. Currency Volatility Implied volatility among currencies of the Group of Seven nations jumped to 12.73 percent, the highest level since March, according to the JPMorgan Chase & Co. Volatility Index. The Swiss Central Bank won’t exclude any “effective measures” to curb the advance of the franc, Hildebrand told Neue Zuercher Zeitung in an interview. “At some point, an overvaluation becomes absurd, and that is already the case for the Swiss franc today,” Hildebrand was quoted as saying. “We clearly communicated that we are willing to take further measures if those are necessary.” The franc is being pushed lower by “fear of the Swiss National Bank intervening,” said Neil Jones, the head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. “There’s a real nervousness about that.” The Swiss franc fell against 15 of 16 major peers tracked by Bloomberg, losing most against Norway’s krone and the euro. It’s still stronger against all 16 currencies this year. German Data “If it’s the case that the risk-off trade is not quite what it was, the franc will get weaker,” Mizuho’s Jones said. The euro has slumped 3.6 percent over the past three months, the second-worst performer after the Swedish krona among the 10 currencies tracked by Bloomberg Correlation-Weighted Indexes, amid concern that the debt crisis may slow growth and dim prospects for higher interest rates in the region. Industrial production in Germany unexpectedly decreased in June, led by declining construction output and a drop in investment goods such as machinery. Production declined 1.1 percent from May, when it rose a revised 0.9 percent, the Economy Ministry in Berlin said today. Japan’s yen headed for five-day declines against the franc, dollar, British pound and euro. Yesterday was the third time Japan sold its currency to support exporters after six years of a hands-off approach that ended in September 2010. Finance Minister Yoshihiko Noda said the action was unilateral. It probably spent 4 trillion yen ($51 billion) in the operation, the Nikkei newspaper reported, without saying where it obtained the information. The Bank of Japan sold 692.5 billion yen on March 18, when it led a coordinated effort with the G-7 to counter a jump in the yen after the March 11 earthquake and tsunami. Last September, Japan unilaterally sold 2.12 trillion yen. “The risk-off impetus that the yen typically is subject to is playing a part,” said Sacha Tihanyi, a Hong Kong-based senior currency strategist at Scotia Capital, the investment banking unit of Bank of Nova Scotia. “Though the BOJ’s bid on the dollar-yen is going to be a threat, there is also going to be solid buying pressure on the yen.” To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.

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