Dollar Heads for Weekly Decline Versus Yen Before U.S. Payrolls

Dec. 5 (Bloomberg) -- The dollar headed for a fifth weekly decline against the yen, its longest losing streak in four years, before a U.S. report forecast to show the highest unemployment rate since 1993.

The greenback was also on course for a second weekly drop versus the euro as an expected contraction in nonfarm payrolls may add to the case for the Federal Reserve to lower interest rates. The euro fell against the yen this week, while the British pound declined versus the greenback. European Central Bank President Jean-Claude Trichet delivered the biggest interest-rate cut in the bank’s 10-year history and the Bank of England reduced its main interest rate to the lowest level since 1951.

“The market is moving to a broadly weak trend for the dollar,” said Hideki Amikura, deputy general manager of foreign exchange at Nomura Trust and Banking Co., a unit of Japan’s largest brokerage. “Nonfarm payrolls numbers are likely to be ugly. This should pressure the dollar to trade lower.”

The dollar bought 92.34 yen as of 8:09 a.m. in Tokyo from 92.23 yen late yesterday in New York, on course for a 3.3 percent decline this week. The euro traded at $1.2768, little changed from yesterday and up from $1.2691 at the end of last week. The euro was quoted at 117.93 yen, down 2.7 percent from Nov. 28. The pound stood at $1.4683, down 4.5 percent this week.

The dollar may fall to 88 yen this month, Amikura said.

U.S. Payrolls

U.S. payrolls shrank by 333,000 workers in November after a drop of 240,000 in the previous month, according to the median forecast of 73 economists surveyed by Bloomberg News. The jobless rate jumped to 6.8 percent, the highest level in 15 years, according to the median forecast. The Labor Department will release the report at 8:30 a.m. in Washington.

“Some are selling the dollar ahead of the payroll report,” said Brian Dolan, chief currency strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey. “You have a perfect storm building for the dollar.”

Fed Chairman Ben S. Bernanke yesterday urged the use of more taxpayer funds for new efforts to prevent home foreclosures, saying in a speech in Washington that the private sector is incapable of coping with the crisis on its own.

Futures on the Chicago Board of Trade showed yesterday 72 percent odds the Fed will lower its 1 percent target rate to 0.25 percent on Dec. 16, compared with a 52 percent chance on Dec. 3.

The ECB lowered its main refinancing rate by 0.75 percentage point to 2.5 percent. The median forecast of 57 economists surveyed by Bloomberg News was for a reduction of half a percentage point.

Sterling fell as much as 1.4 percent to 87.26 pence per euro yesterday, the weakest level since the 15-nation currency’s 1999 debut, after the BOE lowered its target lending rate by a full percentage point to 2 percent. The pound was last quoted at 86.97 pence per euro, on course for a 5.1 percent weekly decline.