July 7 (Bloomberg) -- The euro may fall in Asian trading as economists said a report tomorrow will probably show more people in Germany are looking for work, after a report Friday showed a decline in factory orders in the country. The number of people looking for work in Germany probably rose by 11,000 last month, keeping the jobless rate at a 4 1/2- year high of 10.7 percent, according to the median forecast of 24 economists surveyed by Bloomberg News. Factory orders dropped by 2.2 percent in May from April. The euro traded at $1.1465 at 12:21 p.m. in Tokyo from $1.1490 late Friday in New York, headed for its fourth decline. The 12-nation European currency was at 135.39 yen from 135.62. ``People expect the euro zone's economic condition to be worse than that of the U.S.,'' said Hidehiko Inamura, vice president of foreign exchange in Tokyo at Citigroup Inc., the second-biggest trader in the $1.2-trillion-a-day currency market, according to Euromoney magazine. ``Some data show that while the U.S. economy is recovering, the euro-land economy is struggling.'' The euro may slide to $1.1325 this week, he said.
The economy of the dozen countries that share the euro may grow as little as 0.7 percent this year, the Italian newspaper Il Messaggero quoted European Monetary Affairs Commissioner Pedro Solbes as saying. ``It's improbable growth will reach 1 percent, as we had previously forecast,'' Solbes said yesterday in Gaeta, Italy, Messaggero reported yesterday.
U.S. Factory Growth
U.S. factory orders unexpectedly gained in May, rising 0.4 percent, a report last week showed. The world's biggest economy will probably grow 3.5 percent in the third quarter and 3.7 percent in the final three months of the year, according to the latest Blue Chip survey of economists. The U.S. currency may extend its 1.5 percent gain against the euro in the past month on optimism growth will accelerate and spur demand for stocks and other assets, according to a Bloomberg News survey. Twenty-three of 33 analysts, traders and investors from Tokyo to New York polled on Thursday and Friday recommended buying or holding the dollar this week, after an industry report on Thursday showed service businesses, the biggest part of the U.S. economy, grew in June. Seventeen favored buying or holding the dollar against the yen.
Bank of Japan Sales
In Japan, the yen may fall versus the dollar on speculation among traders that the Bank of Japan will sell its currency to stem a gain that hurts exports, which account for about 11 percent of the world's second-largest economy. The central bank sold about 629 billion yen ($5.32 billion) in June, after a record 3.98 trillion yen the month before. It sold a total of 2.39 trillion yen in the first three months of 2003. A stronger yen will make it harder for exporters such as Toyota Motor Corp. to compete with overseas rivals and reduces their revenue in yen terms. Annual operating profit at Toyota, Japan's biggest car manufacturer, drops about $200 million for every 1 yen rise against the dollar. ``There is speculation the authorities sold yen when the dollar weakened below 118, which is making it hard to buy yen,'' said Tohru Sasaki, a Tokyo-based currency strategist at J.P. Morgan Chase & Co., who is also a former BOJ official. J.P. Morgan Chase is the fourth-largest trader in the currency market, according to Euromoney magazine.
Japanese Stock Gains
The yen's rise may be limited to 117.80 per dollar today, he said. The Japanese currency was little changed at 118.09 per dollar from 118.14 late Friday in New York. The yen may still strengthen against some currencies on speculation among traders that a gain of almost 14 percent in the Nikkei 225 Stock Average in the quarter ended June 30 may attract overseas investors. The benchmark index added more than 6 percent this month. Overseas investors were net buyers of Japanese equities for an 11th week in the week ended June 27, according the Tokyo Stock Exchange. The figure marked the longest buying streak in almost four years. ``The performance of Japanese stocks has been firm, supporting the yen,'' said Kenji Kobayashi, manager of the foreign exchange and treasury division in Tokyo at Bank of Tokyo- Mitsubishi Ltd., a unit of Japan's third-largest bank. The yen may strengthen to 117.80 per dollar today, he said. In other trading, the British pound was little changed against the dollar at $1.6657. The dollar hovered at 1.35 Swiss francs. //www.bloomberg.com