Yen, Dollar Strengthen as U.S. Job Cuts Boost Demand for Safety

July 3 (Bloomberg) -- The yen and the dollar rose for a second day against the euro after a U.S. government report showed employers cut more jobs last month than economists forecast, boosting demand for the safety of the two currencies.

The yen advanced against all 16 major currencies on speculation declines in Asian stocks will spur investors to sell higher-yielding assets. The euro headed for a weekly loss versus the dollar before a European report today that economists say will show retail sales fell in May, signaling the 16-nation region’s economy will take time to recover.

“The markets are getting a dose of reality after becoming over-optimistic on the worldwide rebound,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s third-largest bank. “Risk aversion is back, and the bias is for the yen and the dollar to be bought.”

The yen advanced to 133.61 per euro as of 9:22 a.m. in Tokyo from 134.34 yesterday in New York. The dollar climbed to $1.3960 per euro from $1.4003 yesterday, after earlier rising to $1.3929, the highest level since June 25. The U.S. currency declined to 95.74 yen from 95.94 yen.

The pound dropped 0.3 percent to $1.6351, and the Swiss franc weakened 0.3 percent to 1.0875 per dollar. Currency movements may be volatile in Asia as a national holiday in the U.S. reduces liquidity, Societe Generale’s Saito said.

South Korea’s won led Asian currencies lower after stocks in the region fell. The MSCI Asia-Pacific Index declined 1 percent, and the Nikkei 225 Stock Average fell 1.7 percent. The won dropped 0.5 percent to 1,276.40 per dollar.

Job Losses

The yen strengthened for a second day against the pound after the U.S. Labor Department said yesterday employers cut 467,000 jobs in June after a revised decrease of 322,000 the previous month. The median forecast of economists surveyed by Bloomberg News was for a reduction of 365,000. The unemployment rate rose to 9.5 percent from 9.4 percent.

“Poor economic data may damp appetite for riskier assets,” said Masafumi Yamamoto, head of foreign-exchange strategy for Japan at Royal Bank of Scotland Group Plc in Tokyo and a former Bank of Japan currency trader. “There’s a high possibility this will lead to strength in the dollar and the yen and weakness in commodity currencies such as the Australian and New Zealand dollars.”

The yen typically strengthens in times of financial turmoil as Japan’s trade surplus makes the currency attractive as it means the nation does not have to rely on overseas lenders, and the dollar is bought as it is the world’s main reserve currency.