Bloomberg News

Dollar Declines as U.S. Adds Fewer Jobs, Euro Gains on Greece

June 03, 2011

June 3 (Bloomberg) -- The dollar fell, reaching a one-month low against the yen, after a report showed U.S. employers in May added the fewest jobs in eight months, increasing concern the recovery is slowing.

The euro rose to a one-month high against the dollar as Greece’s government said a review of the country’s economic progress by the European Union, International Monetary Fund and European Central Bank concluded “positively.” The U.S. currency dropped to a record low against the Swiss franc as investors sought haven assets after the jobless rate unexpectedly rose to 9.1 percent.

“The U.S. economy is in a cool-down period and with the strong growth in the European core, the interest-rate differential and the likelihood that you’re going to get another bailout for Greece, it’s a recipe for euro strength,” said Jessica Hoversen, a New York-based analyst at the futures broker MF Global Holdings Ltd.

The dollar fell 0.4 percent to 80.54 yen at 10:55 a.m. in New York, from 80.90 yesterday, after touching 80.05, the weakest since May 5. It dropped 0.8 percent against the franc to 83.48 centimes, the lowest level since at least 1971 and fell 0.5 percent to $1.4568 per euro, the weakest since May 6.

IntercontinentalExchange Inc.’s Dollar Index, which measures the greenback against the currencies of six trading partners, fell 0.4 percent to 74.041 from 74.333, reaching the lowest since May 6.

Annual Basis

The dollar has dropped 5.8 percent this year against its nine developed-nation counterparts, the biggest decline in the group, according to Bloomberg Correlation-Weighted Currency Indexes. The euro has gained 3 percent this year and the yen has dropped 4.7 percent.

U.S. payrolls increased by a less-than-projected 54,000 last month, after a revised 232,000 gain in April that was smaller than initially reported, Labor Department figures showed today in Washington. The median forecast in a Bloomberg News survey called for payrolls to rise 165,000. The jobless rate climbed to the highest level this year from 9 percent a month earlier.

“It’s an ugly, ugly number. It shows a considerable slowdown in economic activity,” said Boris Schlossberg, director of research at online currency trader GFT Forex in New York. “The Aussie dollar is tumbling very badly because it’s clearly reacting to the negative risk news of the day.”

Services Update

The Institute for Supply Management’s index of U.S. non- manufacturing business increased to 54.6 in May from 52.8 a month earlier. The median forecast of 74 economists surveyed by Bloomberg News projected the measure would rise to 54.

The euro extended its gains after Greece’s announcement. Discussions on fiscal plans, state asset sales and structural reforms were held during the review, according to an e-mailed statement from the Athens-based Finance Ministry. These plans will be submitted to Cabinet and then to Parliament in the coming days, it said.

Australia’s dollar fell 0.3 percent to $1.0639. New Zealand’s currency dropped 0.8 percent to 80.90 U.S. cents and Norway’s krone fell 0.2 percent to 5.3851 per dollar.

Weaker-than-expected economic data and low interest rates have damped the appeal of U.S. assets as the Federal Reserve lags behind central banks from the euro zone to Australia.

Factory Update

A report earlier this week showed manufacturing in the U.S. last month expanded at the slowest pace since September. Home prices in 20 U.S. cities dropped to the lowest level since 2003 in March, another report showed.

The Fed has kept its benchmark interest rate at a record low of zero to 0.25 percent since December 2008. The European Central Bank raised its rate by 25 basis points in April and the Reserve Bank of Australia has raised its benchmark rate seven times since the financial crisis.

Canada’s dollar fell the most against the dollar among the major currencies and Mexico’s peso also fell after the unemployment report. The U.S. is the countries’ largest trading partner.

The Canadian dollar dropped 0.6 percent to 98.09 cents per U.S. dollar and the peso lost 0.4 percent to 11.6787.

--Editors: Paul Cox, Dennis Fitzgerald

To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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