Dollar Set for Fourth Monthly Loss Against Euro on Risk Demand

Oct. 30 (Bloomberg) -- The dollar headed for a fourth monthly drop against the euro, its longest stretch since 2004, as the U.S.’s return to growth renewed optimism a global recovery will quicken, aiding demand for higher-yielding assets.

The yen was little changed against the euro, set for the biggest monthly slide since May, after a government report showed Japan’s jobless rate unexpectedly dropped for a second month, reducing demand for the relative safety of the Japanese currency. Australia’s dollar is rising for a record ninth month as global stocks rallied and prices climbed for commodities that comprise more than half the South Pacific nation’s exports.

“The recovery is still at work and the liquidity is ample,” said Tomohiro Nishida, a dealer in Tokyo at Chuo Mitsui Trust & Banking Co., a unit of Japan’s seventh-largest banking group. “You can’t stop money flying into higher-yielding currencies at the expense of funding currencies.”

The dollar traded at $1.4832 per euro at 9:47 a.m. in Tokyo from $1.4822 yesterday in New York. The yen was at 135.46 per euro from 135.51 yesterday. The greenback bought 91.32 yen from 91.41 yen.

Australia’s currency bought 91.51 U.S. cents from 91.50 cents in New York yesterday and is set to gain 3.7 percent in October.

The MSCI Asia Pacific Index of regional shares advanced 0.8 percent today and the Nikkei 225 Stock Average gained 1.1 percent. The Standard & Poor’s 500 Index increased 2.3 percent yesterday and crude oil for December delivery increased 3.8 percent to $79.87 a barrel.

U.S. Recovering

The dollar is poised for the longest stretch of monthly losses against the euro since 2004 as a Bloomberg News survey of economists showed that the Institute for Supply Management- Chicago Inc’s business barometer probably rose to 49.0 in October from 46.1 in the previous month. The data is due today.

Adding to signs the world’s largest economy is recovering, the Institute for Supply Management’s factory gauge also rose to 53.0 in October from 52.6 in the previous month, according to a separate Bloomberg News survey before the release on Nov. 3. Fifty is the dividing line between expansion and contraction.

The Commerce Department reported yesterday U.S. gross domestic product grew at a 3.5 percent annual pace in the third quarter, after shrinking in the previous four periods. The median forecast of 79 economists in a Bloomberg survey was for an expansion of 3.2 percent.

Japan Adds Jobs

The yen fell against 13 of the 16 most-active currencies as the unemployment rate declined to 5.3 percent from 5.5 percent in August. The median estimate of 29 economists surveyed by Bloomberg was for the rate to increase to 5.6 percent.

“Good data from Japan will strengthen the risk appetite that resurfaced on strong U.S. data,” said Takashi Kudo, director of foreign-exchange sales in Tokyo at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp.

Separate Japanese government figures showed the job-to- applicant ratio, a leading indicator of employment trends, improved for the first time in more than two years. The ratio rose to 0.43 last month from a record low of 0.42 in August, meaning there are 43 jobs for 100 job seekers.

Euro Versus Pound

The euro may rise for the first time in four days against the pound on speculation a German report will show retail sales rebounded in September, adding to signs the recession in the 16- nation region is over.

Retail sales in Germany, Europe’s largest economy, rose 1 percent in September after a revised 2.4 percent decline in August, according to a Bloomberg News survey of economists. The Federal Statistics Office releases the report at 8 a.m. in Weisbaden today.

“The recovery in the euro-zone economy appears to be on a solid footing,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “The bias is for the euro to rise.”

European Central Bank council member Axel Weber yesterday signaled policy makers may start to withdraw emergency stimulus measures next year by scaling back the bank’s “very long-term” loans to banks. The comments are the first to indicate the ECB is getting closer to enacting its exit strategy.

The euro traded at 89.63 pence from 89.58 pence in New York yesterday, and was set for its first monthly decline versus the pound since June.