BLBG: Dollar Falls Toward Three-Week Low Against Yen on Slowing Growth Outlook
The dollar fell toward a three-week low against the yen before a report forecast to show U.S. employers added fewer jobs in May, signaling a slowing economy that may prevent the Federal Reserve from tightening policy.
The yen rose against all 16 of its most-traded peers as Asian stocks declined after China’s non-manufacturing purchasing managers’ index fell in May. The euro is headed for its longest stretch of weekly gains versus the dollar since March before a report next week predicted to show European producer-price inflation accelerated.
“It’s pretty clear that the U.S. economy, which hit a soft patch in the first quarter, is seeing that lack of momentum spill over into the second quarter,” said Richard Grace, Sydney-based chief currency strategist and head of international economics at Commonwealth Bank of Australia. “The U.S. dollar is going to remain under downward pressure.”
The dollar fell to 80.68 yen as of 6:31 a.m. in London from 80.90 in New York yesterday, when it declined as low as 80.57, the weakest since May 13. It traded at $1.4484 per euro from $1.4491 yesterday, down 1.2 percent since May 27. The U.S. currency earlier reached $1.4518 per euro, the least since May 6. The euro weakened to 116.87 yen from 117.23 in New York.
U.S. Outlook
The Dollar Index, which tracks the greenback against the currencies of six trading partners, fell as low as 74.21, the least since May 6, before trading at 74.34.
U.S. jobs growth slowed to 165,000 new employees in May from 244,000 in April, according to estimates in a Bloomberg News survey before Labor Department figures due today.
“Depending on economic data, there may be discussions about additional easing in the U.S., which will trigger a decline in the dollar,” said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd., which provides foreign-exchange margin-trading services. “A drop in stocks or commodities would be a catalyst for the yen to be bought.”
China’s non-manufacturing purchasing managers’ index fell to 61.9 in May from the previously reported 62.5 in April, according to a statement today by the Beijing-based National Bureau of Statistics and the Federation of Logistics and Purchasing. A reading above 50 indicates an expansion.
The MSCI Asia Pacific Index declined 0.2 percent after rising as much as 0.4 percent earlier.
European Inflation
The dollar has declined 0.2 percent in the past week, according to Bloomberg Correlation-Weighted Currency Indexes, which track 10 developed-nation currencies. The euro has advanced 1.1 percent and the yen is down 0.1 percent.
Factory-gate prices in the euro region rose 0.9 percent in April from the previous month, the European Union’s statistics office in Luxembourg is forecast to say June 6 according to a Bloomberg News survey.
The European Central Bank raised its key interest rate by 25 basis points to 1.25 percent in April, even as Portugal joined Greece and Ireland in requesting financial aid from the EU and the International Monetary Fund. In comparison, the Federal Reserve and Bank of Japan are holding rates near zero.
ECB President Jean-Claude Trichet said June 1 that the ECB “will continue to deliver price stability.”
The pound reached a one-month low against the euro before a report that economists said will show U.K. services growth slowed for a second month in May. A gauge based on a survey of companies fell to 54.2 from 54.3 the previous month, Markit Economics Ltd. and the Chartered Institute of Purchasing and Supply will say, according to the median estimate of economists polled by Bloomberg News.
“We look for renewed underperformance of the pound going forward,” London-based Morgan Stanley analyst Tim Davis wrote in a research note dated yesterday. “The growth outlook remains subdued and the recent economic dataflow has disappointed.”
The pound weakened to 88.62 pence per euro and earlier fell as low as 88.68, the least since May 6. It declined 0.2 percent to $1.6345 from yesterday in New York.
To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
