Dollar Falls to One-Week Low Versus Euro


The dollar fell to a one-week low against the euro after a government report showed the U.S. unemployment rate increased the most in more than two decades, adding to evidence the economy may not be rebounding.

The currency dropped as traders raised speculation that the Federal Reserve may refrain from increasing borrowing costs this year. The dollar extended yesterday's decline that came after European Central Bank President Jean-Claude Trichet said a July increase in the main refinancing rate, already twice the U.S. benchmark, is ``possible.''

The dollar decreased 0.4 percent to $1.5661 per euro at 9:19 a.m. in New York, from $1.5593 yesterday. It touched $1.57, the weakest level since May 28. The dollar was little changed at 105.99 yen, compared with 105.94 yen. The euro increased 0.5 percent to 165.99 yen, from 165.20 yen.

The U.S. currency has fallen 0.6 percent against the euro for the week, while gaining 0.5 percent versus the yen. The euro was headed for a weekly increase of 1.1 percent versus the yen.

Payrolls shrank by 49,000 last month following a revised decline of 28,000 in April, the Labor Department said today in Washington. The median forecast of 79 economists surveyed by Bloomberg News was for a decrease of 60,000.

The jobless rate increased to 5.5 percent from 5 percent, the biggest jump since February 1986. That compared with an advance to 5.1 percent forecast by economists.

The dollar touched a five-week high against the euro on May 2, when April's job reduction reported by the Labor Department was less than economists forecast.

The yuan rose the most in more than three months on speculation China will seek a stronger currency and a narrower trade surplus to help curb inflation. China's currency increased 0.3 percent to 6.9230 against the dollar in Shanghai.

The U.S. currency fell more than 1 percent against the euro yesterday, the most since April, as Trichet said policy makers are in a state of ``heightened alertness'' over inflation. That more than erased the dollar's gains that came after Fed Chairman Ben S. Bernanke said on June 3 that the central bank is ``attentive'' to the implications of the weakened currency.

The dollar has lost 11 percent against the euro since the Fed started to lower interest rates from 5.25 percent in mid- September. The U.S. currency has increased 3 percent since touching the all-time low of $1.6019 per euro on April 22 as the Fed signaled the rate cutting may be over.

 

 


TradingEconomics.com, Bloomberg
6/6/2008 6:42:00 AM