The dollar strengthened against all but one of its 16 major counterparts before President Barack Obama unveils proposals to spur job growth and the U.S. economy. The greenback snapped yesterday’s losses versus the yen and the euro on prospects Obama’s plans will make it less likely that Federal Reserve Chairman Ben S. Bernanke will add to monetary easing. The 17-nation euro fell against its U.S. counterpart on speculation European Central Bank President Jean- Claude Trichet will signal a less aggressive stance toward inflation. The Australian dollar slid versus all of its most traded peers after data showed the country’s employers cut jobs. “Bernanke has been arguing for quite a while that fiscal policy needed to do more to help growth,” said Mike Burrowes, a currency strategist at Bank of New Zealand Ltd. in Wellington. “Potentially, this reduces some of the need for the Fed to take further action. That could potentially be positive for the dollar.” The dollar fetched $1.4055 per euro at 12:58 p.m. in Tokyo from $1.4098 in New York yesterday, after reaching $1.3972 on Sept. 6, the most since July 13. It traded at 77.38 yen from 77.26. The euro bought 108.76 yen from 108.90. Obama, facing re-election in 2012, will address a joint session of Congress today on proposals to speed job creation that may inject more than $300 billion into the economy next year. Almost half the stimulus may come from tax cuts, including an extension of a two-percentage-point reduction in the payroll tax paid by workers due to expire Dec. 31 and a new decrease in the portion of the tax paid by employers. ‘Risk of Stalling’ Fed Bank of San Francisco President John C. Williams yesterday cut his growth forecast for the rest of 2011, and said the economy probably won’t be able to expand enough to bring down a 9.1 percent jobless rate soon. “The real threat is an economy that is at risk of stalling and the prospect of many years of very high unemployment, with potentially long-run negative consequences,” Williams said in a speech in Seattle. While the Fed could take new steps to ease conditions, “these ‘treatments’ won’t make our economic problems go away and their costs and benefits must be carefully balanced.” The central bank may decide at its Sept. 20-21 meeting to replace some of the short-term Treasury securities in its $1.65 trillion portfolio with long-term debt in a bid to lower rates on everything from mortgages to car loans, according to economists at Wells Fargo & Co., Barclay’s Capital Inc. and Goldman Sachs Group Inc. Fed Chairman Bernanke is due to speak in Minnesota today on the country’s economic outlook. Passing the Baton The U.S. economy grew at a 1 percent annual rate in the second quarter, and unemployment remained stuck at 9.1 percent in August as job growth stagnated. Confidence among consumers plunged last month to the lowest level in more than two years. “You’re likely to see the Fed carry along as they have been,” said Thomas Averill, a director in Sydney at Rochford Capital, a currency and interest-rate risk management company. “The real baton for stimulus has now been passed to the fiscal side of the equation as opposed to the monetary policy side.” Demand for the euro was limited on speculation the ECB will lower inflation and growth forecasts and signal a pause in interest-rate increases at today’s meeting in Frankfurt. “The situation surrounding the euro hasn’t changed at all,” said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s third-largest bank by market value. “If Trichet downgrades his inflation outlook, the market will price in a halt in interest-rate increases, weighing on the euro.” ECB Rate Bets While all 57 economists surveyed by Bloomberg expect the ECB to leave its benchmark rate unchanged at 1.5 percent this meeting, traders are betting it will cut borrowing costs by 25 basis points over the next 12 months, a Credit Suisse Group AG index based on swaps showed yesterday. The Australian dollar trimmed yesterday’s 1.7 percent surge against the greenback after the statistics bureau in Sydney said that employers cut 9,700 workers in August, compared with the median estimate in Bloomberg News survey for an increase of 10,000. The jobless rate climbed to 5.3 percent, the highest since October 2010, from 5.1 percent in July. “We’re seeing Aussie coming off since jobs data was very weak,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong. “With the unemployment rate ticking higher, investors are suggesting having restricted policy settings may be somewhat inappropriate.” Australian Unemployment Australia’s currency dropped to $1.0583 from $1.0662 yesterday. It fell 0.6 percent to 81.89 yen. The pound traded 0.2 percent from a nine-week low against the dollar after the U.K.’s Institute of Directors said in an e- mail the Bank of England should add 50 billion pounds ($79.8 billion) to its bond program and resume its asset purchases immediately. The central bank will probably keep its key rate at a record low of 0.5 percent and maintain its bond-purchase program at 200 billion pounds at today’s meeting. Sterling declined to $1.5958 from $1.5991 yesterday, when it reached $1.5919, its weakest since July 13. It was at 88.08 pence per euro from 88.16. To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

Source