The dollar headed for a weekly loss against the euro on speculation
Europe's central bank will keep its interest-rate advantage as the U.S.
economy loses jobs.
The currency fell from a four-week high versus the euro yesterday after
European Central Bank President Jean-Claude Trichet said a rate
increase in July is ``possible.'' A government report will probably
show the U.S. lost jobs for a fifth consecutive month. The yen headed
for a second weekly decline as stocks rallied, prompting investors to
add to holdings of higher-yielding assets funded with Japan's currency.
Barclays Capital and Citigroup Global Markets Inc. both predicted the
euro may advance further in research published after Trichet's speech.
The ECB kept its main refinancing rate at a six-year high of 4 percent
yesterday, unchanged since last June. The Federal Reserve has cut its
target seven times since mid-September to 2 percent to stave off a
recession.
``Trichet went a step further than Bernanke and signaled that the ECB
was much more likely to raise interest rates at its next meeting than
markets had previously thought,'' currency analysts led by London-based
David Woo at Barclays Capital wrote in a research note yesterday. ``The
euro may be undervalued by as much as 1.5 percent against the dollar.''
U.S. employers probably lost 60,000 jobs in May after a drop of 20,000
in the prior month, according to the median forecast of 79 economists
surveyed by Bloomberg News. The Labor Department's report is due at
1230GMT.
``Disappointing payrolls data have the potential to knock the dollar
lower,'' said Akio Shimizu, chief manager of foreign exchange trading
at Mitsubishi UFJ Trust & Banking Corp. in Tokyo, a unit of Japan's
second-largest bank. ``A combination of doubts about the economy and a
lack of improvement in credit markets are bad for the dollar.''