Dollar Falls Against Yen for Third Day

The dollar fell against the yen for a third day after a government report showed U.S. employers cut more jobs last month than economists forecast, indicating the world's largest economy is headed for a recession.

The greenback dropped as traders raised bets that the Federal Reserve will reduce the target lending rate by as much as three-quarters of percentage point this month. The U.S. House of Representatives prepared to vote on a revised $700 billion financial bailout after rejecting a plan Sept. 29.

The dollar also gained as crude oil futures fell 35 percent from a record of $147.27 a barrel reached on July 11. The euro- dollar exchange rate and oil have had a correlation of 0.8 in the past year, according to Bloomberg calculations. A reading of 1 would mean they moved in lockstep.

The dollar dropped 0.1 percent to 105.20 yen at 8:53 a.m. in New York, from 105.33 yesterday. It increased 0.3 percent to $1.3775 per euro, from $1.3819. The euro decreased 0.4 percent to 145.03 yen, from 145.55

U.S. payrolls shrank by 159,000 last month, following a revised decline of 73,000 in August, the Labor Department said today in Washington. The jobless rate stayed at 6.1 percent. The U.S. has lost jobs every month this year.

The euro
was headed for a record 5.6 percent weekly drop against the dollar after European Central Bank President Jean- Claude Trichet said yesterday policy makers discussed cutting the main refinancing rate. European economies face ``increasing downside risks,'' he said at a Frankfurt press conference following the decision to keep borrowing costs at a seven-year high of 4.25 percent.

The pound headed for its biggest weekly drop versus the dollar since 1992 after a report showed U.K. services contracted the most in at least 12 years, fueling speculation the economy may already be in a recession and the Bank of England will cut interest rates soon. 

The U.K. currency was at $1.7668 at 1:07 p.m in London, from $1.7639, a loss of 4.3 percent in the week, the biggest since September 1992. The pound traded at 185.73 yen, from 185.80 yesterday, and 195.54 at the end of last week. Against the euro, it was little changed at 78.34 pence, gaining 1 percent since Sept. 26.

The Canadian dollar is headed for the biggest weekly slump since at least 1971 as commodity prices plummet in the wake of the global financial crisis and investors scramble to buy U.S. dollars. The currency has plunged 4 percent against its U.S. counterpart since Sept. 26, the biggest weekly loss since Bloomberg began keeping records of the currency in January 1971. It traded at C$1.0763 per U.S. dollar at 7:47 a.m. in Toronto, from C$1.0791 yesterday and C$1.0336 a week ago.

The Australian dollar
fell by the most this week since 1985 against the U.S. currency as investors cut holdings of higher-yielding assets on speculation the global economy won't avoid a recession. The currency fell to 77.89 U.S. cents as of 4:38 p.m. in Sydney, taking the loss to 6.3 percent from late in New York on Sept. 26. It touched 77 cents in Asian trade today, the weakest since August 2007.

The New Zealand dollar
dropped versus the yen this week as did its Australian counterpart as investors reduced so-called carry trades, where they borrow money in countries with low interest rates and put the money elsewhere to reap bigger returns. The currency weakened 3.3 percent this week to 66.33 U.S. cents from 68.60 a week ago.,
10/3/2008 6:08:16 AM