Dollar May Extend Drop Versus Euro


The dollar may fall for a second day against the euro before a private report forecast to show U.S. companies shed jobs in June for the first time in four months.

The U.S. currency dropped yesterday to near a three-week low against the euro as crude oil prices rose, adding to concern higher energy prices will weigh on the economy. Turkey's lira was the biggest loser against the dollar among the world's currencies yesterday after police arrested more than 20 people with suspected links to a group allegedly plotting a coup.

The dollar traded at $1.5792 per euro at 6:15 a.m. in Tokyo, following a 0.2 percent decline yesterday. It touched $1.5836 on June 30, the lowest level in three weeks, and dropped to the all-time record of $1.6019 on April 22. The yen was little changed at 106.08 per dollar. Japan's currency traded at 167.51 versus the euro, after dropping 0.2 percent yesterday.

Crude oil for August delivery increased 0.7 percent to $141.04 a barrel at the close of floor trading on the New York Mercantile Exchange yesterday. The euro-dollar exchange rate and oil have moved in the same direction 90 percent of time during the past year, according to Bloomberg calculations based on the correlation of their value changes. Oil touched a record $143.67 on June 30.

Companies in the U.S. probably eliminated 20,000 jobs last month after adding 40,000 in May, according to the median forecast of 27 economists surveyed by Bloomberg News. The decline would be the first since February. The report from ADP Employer Services is due at 8:15 a.m. New York time.

The ADP report, which doesn't include government jobs, has overstated private employment changes by 104,000 on average each month since November. A Labor Department report will probably show tomorrow that non-farm payrolls shrank by 60,000 workers last month, according to the median forecast of 79 economists surveyed by Bloomberg News.

The dollar briefly erased its loss versus the euro yesterday after the Institute for Supply Management's factory index showed U.S. manufacturing unexpectedly expanded in June for the first time in five months.


TradingEconomics.com, Bloomberg
7/1/2008 4:12:51 PM