London, Jan. 16 (Bloomberg) -- The dollar may gain for the first day in five against the euro and the yen amid speculation U.S. economic growth will pick up. An index of manufacturing in the Philadelphia area may be better than expected this month, some analysts said, after a report yesterday showed a surprise surge in the New York Federal Reserve's Empire State Manufacturing index. The figures suggest growth in the world's largest economy may outpace that of the 12- country euro region and Japan, analysts said. ``We could get some good data today and the dollar will rally on the back of it,'' said Mark Henry, a currency strategist at GNI Ltd. in London. ``The U.S. economy is still very favorable compared to Europe.''
The dollar, little changed at $1.0569 to the euro at 10 a.m. in London, has weakened from $1.0487 a week ago. The U.S. currency was at 117.93 yen, from 117.96, having fallen to as low as 117.64 on Tuesday. The median forecast of 46 economists surveyed by Bloomberg News shows the Federal Reserve Bank of Philadelphia's general economic index, a gauge of manufacturing in the area, probably fell to 9 this month, from 11.3 last month. The report is due at 5 p.m. London time. Some analysts said they are increasing their forecasts after the Empire manufacturing index rose to the highest level since compilation of the statistics started in 2001. ``After the Empire survey, we're looking for quite a large move higher in the Philadelphia Fed, and that might be good for the dollar,'' said Chris Furness, senior currency strategist at 4Cast, which had the most accurate forecasts in Bloomberg's fourth- quarter foreign-exchange survey.
`Strong By Default'
The dollar has been weakening amid concern a U.S.-led attack on Iraq may curb the $1.4 billion a day of international investment the U.S. must attract to offset its deficit in the current account, the broadest measure of international trade. Both Japan and the euro-region have current-account surpluses. The euro, which rose to as high as $1.0596 on Tuesday, ``is strong by default because of dollar vulnerability,'' Henry at GNI said. ``People are concerned about what will happen if the situation in Iraq escalates.'' U.K. Prime Minister Tony Blair yesterday dismissed calls that he won't join a U.S. attack without a new United Nations mandate. Investors may look to buy the dollar on a stronger Philadelphia Fed figure because ``the euro is too strong based on the economic situation,'' Henry said. ``If you look at Germany, it's an economy that's got problems.''
Germany Slows
Europe's biggest economy grew at the slowest pace last year since the 1993 recession. The $2 trillion-economy expanded 0.2 percent in 2002 after 0.6 percent the year before, the German Federal Statistics Office said. In the fourth quarter, the economy probably stagnated, it said. To be sure, there are signs that the U.S. economy is struggling to rebound, and war with Iraq would hinder growth by eroding consumer confidence and consumer spending, analysts said. The Fed said late yesterday in its regional economic survey, known as the beige book, that the economy was ``sluggish'' from mid-November to early January because of weak consumer spending and a lack of job creation. Payrolls fell unexpectedly and retail sales rose less than forecast last month. A report at 1:30 p.m. London time will probably show the number of U.S. workers filing new claims for state jobless benefits rose to 395,000 in the week ended Saturday from 389,000 the previous week, based on the median of 33 forecasts in a Bloomberg News survey. ``The employment data and other recent figures indicated the weakness of the U.S. economy, which will weigh on the dollar in coming days,'' said Noriaki Kubo, foreign-exchange manager at Daiwa Bank Ltd. in Osaka, Japan. The dollar may fall to 116.85 yen by the end of next week, he said.
The yen traded as weak as 118.32 to the dollar on speculation the Bank of Japan will sell its currency to stem gains that threaten an export-led recovery. Japan's currency was at 124.65 yen per euro, from 124.68.
`Reluctant to Sell'
``The market understands that we think excessive movement is not favorable,'' Zembei Mizoguchi, vice finance minister for international affairs, said. The yen has gained 5.6 percent against the dollar in the past three months. A stronger yen erodes the value of overseas earnings for exporters such as Honda Motor Co., Japan's No. 2 automaker, which generates about 80 percent of its operating profit in the U.S. ``Nobody is going home with a short dollar position in case they intervene,'' Furness at 4Cast said. Japan cut its export growth forecast in December to 2 percent for the fiscal year that starts April 1, from a projected 5.4 percent this year. Exports -- about 10 percent of the economy -- expanded 0.6 percent in the third quarter, down from 5.9 percent the previous three months. The yen fell after Jiji newswire reported in a headline that Yasuo Fukuda, Japan's chief Cabinet secretary, indicated he hopes Japan's central bank will guide the yen lower. The newswire didn't say where it got the information. ``People are reluctant to sell the dollar against the yen because of concerns of Japan yen selling,'' said Tsutomu Soma, a trader at Mizuho Corporate Bank Ltd. in Hong Kong. Japan's central bank buys and sells currencies at the Ministry of Finance's behest. In other trading, the British pound was at $1.6034, compared with $1.6023. The dollar traded at 1.3827 against the Swiss franc from 1.3830. //www.quote.bloomberg.com