Yen Set for Third Weekly Loss as Data Suggest Worst May Be Over

June 5 (Bloomberg) -- The yen headed for a third weekly loss versus the euro before a U.S. report that is estimated by economists to show employers cut fewer jobs last month as the deterioration in the labor market slows.

Europe’s single-currency traded near the strongest level since December against the dollar after European Central Bank President Jean-Claude Trichet said the region’s economic performance will improve this year. Australia’s dollar is poised for a third week of advances versus the yen on speculation rising commodity prices will lure investors to the currency.

“The market is already expecting some turnaround in the business cycle,” said Susumu Kato, chief economist in Tokyo at Calyon Securities, the investment banking unit of Credit Agricole SA. “A rise in crude and other commodities suggests a flow of money into risk assets, leading to a weaker yen.”

The yen traded at 136.88 per euro as of 8:58 a.m. in Tokyo, from 136.97 yesterday in New York. It is headed for a 1.4 percent decline versus Europe’s single currency. The yen traded at 96.61 per dollar from 96.58 yesterday, when it reached 96.97, the weakest in four days. The euro bought $1.4165 from $1.4183. It reached $1.4338 on June 3, the strongest level since Dec. 29.

Australia’s dollar traded at 77.31 yen from 77.44 and fell 0.2 percent to 80 U.S. cents. Crude oil for June delivery yesterday rose to a seven-month high of $69.60 per barrel.

The yen may weaken to 150 per euro by the end of this year, Calyon’s Kato said.

‘Rates Are Appropriate’

U.S. employers probably cut 520,000 jobs in May, less than the previous month’s 539,000 decline, according to a Bloomberg survey of economists before today’s Labor Department report. The number of workers filing first-time jobless claims fell in the week ended May 30, a report showed yesterday.

The euro strengthened versus 13 of its 16 major currencies this week as the European Central Bank kept interest rates at an all-time low of 1 percent after reducing them last month.

“The current rates are appropriate,” ECB President Jean- Claude Trichet said yesterday. “For the remainder of the year economic activity will decline with much less negative rates.”

The central bank plans to start buying covered bonds next month to hold down borrowing costs and complete the 60 billion euro ($85 billion) program in June 2010, Trichet told reporters in Frankfurt yesterday.

Risk Appetite

“What Trichet was saying fueled risk appetite in the markets,” said Kathy Lien, director of currency research at GFT Forex, an online currency-trading firm in New York. “I continue to expect the underperformance of the yen against all of the higher-yielding currencies.”

The euro gained 5.8 percent against the dollar since the ECB last met on May 7 as economic reports added to evidence the most acute phase of the recession passed, damping demand for the U.S. currency as a refuge.

The Dollar Index fell yesterday on speculation nations are considering alternatives to the world’s main reserve currency.

Russian President Dmitry Medvedev reiterated concerns about the dollar’s role as the world’s reserve currency and said an alternative may help to create a new global financial architecture, in an interview with Kommersant newspaper published today.

The Dollar Index, used by the ICE to track the greenback against the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, fell 0.2 percent to 79.357 yesterday.