Dollar Trades Near Three-Month High Versus Euro as Stock Slump

March 6 (Bloomberg) -- The dollar traded near a three-month high against the euro on speculation a slide in stocks will prompt investors to reduce holdings of riskier assets.

The greenback headed for its fourth weekly gain versus the euro before a Labor Department report today that economists say will show a 14th month of job losses, also boosting demand for the relative safety of the dollar. The euro was poised for a weekly loss versus the yen after European Central Bank President Jean-Claude Trichet yesterday signaled further cuts in the main refinancing rate after reducing it to a record low.

“The deteriorating global backdrop is reviving risk aversion,” said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. “This may encourage demand for the dollar as well as the yen, which seems to have regained some of its ‘safe-haven’ luster.”

The dollar traded at $1.2543 per euro as of 8:17 a.m. in Tokyo, from $1.2540 late in New York yesterday. It reached $1.2457 on March 4, the strongest since Nov. 21. The yen was at 123.09 from 123.00 per euro yesterday.

Japan’s currency traded at 98.14 per dollar from 98.07 late in New York yesterday. The dollar was at $1.4117 per pound, from $1.4118, and traded at 1.1710 Swiss francs from 1.1713.

The Dollar Index, which the ICE uses to track the greenback against the currencies of six major U.S. trading partners, gained 0.6 percent yesterday to 89.105 as investors sought refuge from global financial turmoil.

‘Dismal’ Jobs Data

U.S. employers cut 650,000 jobs in February, and the unemployment rate surged to 7.9 percent, according to the median forecasts in Bloomberg News surveys of analysts. The Labor Department’s payroll report is due at 8:30 a.m. in Washington.

“The U.S. jobs data is going to be dismal,” said Meg Browne, a currency strategist at Brown Brothers Harriman & Co. in New York. “The longer-term impact is positive for the dollar because where else do you go?”

Stocks in the U.S. and Europe tumbled after JPMorgan Chase & Co., the second-largest U.S. bank, had its rating outlook cut to negative from stable. The Standard & Poor’s 500 Index dropped 4.3 percent to the lowest level since 1996 and Europe’s Dow Jones Stoxx 600 Index declined 3.6 percent.

The euro may extend losses versus the greenback after ECB President Trichet yesterday signaled further cuts in the main refinancing rate after lowering it to 1.5 percent. The Bank of England also reduced its main rate by a half-percentage point to the all-time low of 0.5 percent and said it will pump cash into the economy by purchasing as much as 150 billion pounds ($212 billion) in government and corporate bonds.

“Trichet hinted that further rate cuts may be required,” said Brian Dolan, chief currency strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey. “That sent the euro down to its lows.”