Dollar Snaps Gain Against Yen

The dollar snapped a five-day rally against the yen on speculation a report today will show U.S. manufacturing contracted for a fourth month, limiting the Federal Reserve's scope to raise interest rates.

The U.S. currency may decline before a report on June 6 that will probably show U.S. companies trimmed workers for a fifth month. The British pound fell the most in two weeks after people familiar said Bradford & Bingley Plc, the U.K.'s biggest mortgage lender to landlords, needs to raise money from shareholders and will lower its profit forecast.

The U.S. currency bought 105.31 yen at 9:56 a.m. in Tokyo from 105.52 yen at the end of last week. The dollar traded at $1.5554 against the euro from $1.5554 late in New York on May 30. The euro was at 163.80 yen from 164.15 yen. The dollar may fall to $1.56 per euro today, Soma forecast.

Futures on the Chicago Board of Trade on May 30 showed a 26.8 percent chance the Fed will raise its target rate by a quarter-percentage point to 2.25 percent on Sept. 16, down from 33.6 percent the previous day. The central bank has cut rates seven times since September. Japan's benchmark rate is 0.5 percent and Europe's is 4 percent.

Pension funds, mutual funds and insurance companies bought more dollars than they've sold this year, according to State Street Corp. and Bank of New York Mellon Corp., the largest money managers for institutions. That's significant because speculators such as hedge funds raised bets against the greenback by 36 percent, data from the Commodity Futures Trading Commission in Washington show.

Dollar Snaps Gain Against Yen, Bloomberg
6/1/2008 7:04:34 PM