Dollar Drops From Four-Month High Versus Yen on U.S. Payrolls

The dollar fell from a four-month high against the yen as U.S. employers unexpectedly eliminated jobs last month, boosting speculation that the Federal Reserve may extend stimulus measures. The yen rose against all of its most-traded counterparts including the Australian and New Zealand dollars on speculation the payrolls report will reduce demand for higher-yielding assets. The greenback dropped The dollar fell from a four-month high against the yen as U.S. employers unexpectedly eliminated jobs last month, boosting speculation that the Federal Reserve may extend stimulus measures.

The U.S. currency dropped against all of its most-traded counterparts except for the Taiwanese dollar, falling at least 1 percent against the Brazilian real, South African rand and Swiss franc. The greenback recorded its biggest weekly drop against the euro since November on the prospects for the world’s largest economy.

“The headline doesn’t sit well with the dollar,” said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut. “People had been bracing for a flat to positive number. It puts expectations for a Fed rate hike on ice.”

The dollar slid as much as 0.9 percent to $1.4439 per euro in the biggest intraday decline since Nov. 25, before trading at $1.4409 at 5 p.m. in New York, compared with $1.4308 yesterday. The dollar dropped 0.8 percent to 92.66 yen, from 93.37. It earlier touched 93.77, the highest level since Aug. 28. The euro fell 0.1 percent to 133.46 yen.

U.S. employers eliminated 85,000 jobs in December, the Labor Department said today. The median estimate of 76 economists in a Bloomberg News survey was for no change in nonfarm payrolls. The unemployment rate held at 10 percent.

The greenback avoided declining beyond $1.45 per euro, a level last seen on Dec. 17, as the payrolls report showed a gain of 4,000 jobs in November, the first boost in almost two years.

Dollar ‘Resilience’

“The dollar has shown resilience,” said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. “There were some mitigating factors. Should the damage to the dollar be limited in the aftermath of the report, that would be a positive sign for the greenback.”

The traded-weighted Dollar Index, which the ICE futures exchange uses to track the greenback against currencies including the euro, yen, pound and franc, rose 1.7 percent on Dec. 4, when the Labor Department reported an unexpected drop in U.S. unemployment.

The index had fallen 17 percent from the 2009 peak reached in March as evidence of a global economic rebound spurred investors to buy higher-yielding assets funded with dollars. The index rose 4 percent last month on speculation the Fed was moving closer to withdrawing stimulus measures. The gauge of the greenback dropped 0.6 percent today.

Fed Stimulus

At its Dec. 15-16 meeting, Fed officials debated increasing and extending its stimulus program should the economy weaken, according to minutes released Jan. 6. A few favored such a move while one policy maker discussed a reduction. The target rate for overnight lending between banks was held at a range of zero to 0.25 percent.

The greenback slid 1.2 percent to 1.7264 Brazilian reais today, declined 1 percent to 7.3568 rand, lost 1 percent to 1.0235 franc and fell 0.8 percent to 5.6664 Norwegian kroner.

The dollar posted a 0.5 percent weekly decrease against the yen, its first drop since the five-day period ended Dec. 11, and was down 0.6 percent versus the euro. The European currency gained 0.3 percent against the yen.

The yen appreciated earlier against the dollar after Japan’s Prime Minister Yukio Hatoyama told reporters that rapid foreign-exchange moves were “not good” a day after the newly appointed Finance Minister Naoto Kan said he would welcome a weaker yen. Kan’s predecessor, Hirohisa Fujii, had dismissed the value of a weaker yen to Japan’s economy.

“Hatoyama’s remarks muted the impact of yesterday’s comments from Kan,” said Masahide Tanaka, a Tokyo-based senior strategist at Mizuho Trust & Banking Co., a unit of Japan’s second-largest bank. “Kan’s statement yesterday was a New Year’s gift for Japanese exporters.