Jan. 12 (Bloomberg) -- The dollar weakened to a record against the euro and fell versus the yen in London after a report Friday showed the U.S. economy last month added fewer jobs than expected, boosting speculation the Federal Reserve won't raise interest rates soon. Traders sold the dollar on concern a lack of job creation will prevent the Fed from raising interest rates from a 45-year low of 1 percent, half that of the European Central Bank, giving investors less incentive to hold the currency. ``Until U.S. assets can give a greater rate of return than they do, the dollar is going to remain under pressure,'' said Greg McKenna, currency strategist in Sydney at National Australia Bank Ltd. Friday's jobs report ``was appalling. The overall fundamental negatives for the dollar are dominant.''
The dollar fell to $1.2855 per euro at 7:26 a.m. in London, from 1.2818 late in New York Friday. Earlier, it weakened to a record $1.2873, according to EBS prices. It dropped to 106.46 yen, from 106.80. The dollar has fallen for nine weeks against its 12- nation European counterpart and four against its Japanese one. The dollar may fall to $1.32 per euro this month, McKenna said. Eighty-four percent of the 45 strategists, traders and investors polled by Bloomberg News on Friday from Tokyo to New York favored buying or holding the euro against the dollar. Almost 90 percent advised purchasing or holding the yen. Trading may be less than usual in the $1.2 trillion a day currency market due to a holiday in Japan. The 1,000 jobs created in December compared with the median forecast of 150,000 by economists surveyed by Bloomberg News.
`U.S. Problem'
The Group of 10 forum of central bank governors, meeting in Basel, Switzerland, may signal concern the U.S. dollar's 18 percent decline against the euro and almost 11 percent drop versus the yen in the past year threatens recoveries in the dozen euro nations and Japan. Bank of Japan Governor Toshihiko Fukui said in an interview with Bloomberg News in Basel yesterday that the central bank is ``cautiously watching'' the dollar's decline. Still, the currency's drop is ``a U.S. problem, not ours,'' he said. The BOJ spent up to $10 billion selling its currency on Friday, according to estimates from analysts including Hans Guenter Redeker, head of currency strategy at BNP Paribas SA in London, sending the yen down as much as 2 percent before it rebounded following the U.S. jobs report. The Ministry of Finance sold 5 trillion yen ($47 billion) in U.S. Treasuries to the BOJ to boost its currency sales, the Yomiuri newspaper said on Saturday, without saying where it obtained the information. Japan will continue to sell yen to counter speculative moves in the currency market in the face of a weakening dollar, Finance Minister Sadakazu Tanigaki said yesterday.
`Must Act'
``It is not just that the dollar is weak,'' Tanigaki said on Asahi Television's ``Sunday Project'' program. ``When there are speculative moves in the wrong direction, we must act to intervene at the appropriate time and place.'' The Bank of Japan spent a record 20.1 trillion yen last year through Dec. 26 to keep the yen from rising and hurting the country's exporters. The currency has risen 12 percent in the past year against the dollar, last week trading as high as 105.90 per dollar, the strongest since September 2000. ``It continues to feel as if there's only one dollar buyer in the market and that's the BOJ,'' said Robert Rennie, currency strategist in Sydney at Westpac Banking Corp. ``Had it not been for the intensive intervention in the last several months, a dollar-yen level of 100 would be more than feasible. The yen was also trading at 136.93 per euro, from 136.95.
Not Concerned
The euro also rose after Bundesbank Chief Economist Hermann Remsperger said the currency's appreciation against the dollar, though it may hamper export growth, won't threaten an economic recovery in Europe's largest economy, DeutschlandRadio Berlin said on its Web site. Rising world trade is more important than the euro's exchange rate to the dollar, and the single currency's gain makes imports cheaper, Remsperger, who advises Bundesbank President and European Central Bank council member Ernst Welteke, told the radio station in an interview yesterday. ``It appears as if Europe isn't concerned about the euro's level, which is another reason to add to the dollar's weakness,'' said Peter Clay, currency strategist in Sydney at ABN Amro Holding NV. The dollar may fall to $1.30 per euro this week, he said.
ECB President Jean-Claude Trichet said on Thursday the euro's advance won't slow exports enough to hurt the region's economic rebound. He spoke after the central bank kept its benchmark lending rate at 2 percent. The Fed's policy board next meets on Jan. 28. National Australia Bank's McKenna thinks the U.S. central bank won't raise interest rates ``until the second half of the year at the earliest.'' In other trading, the dollar fell to 1.2208 Swiss francs, from 1.2212 francs. The British pound bought $1.8465, from $1.8477. //www.bloomberg.com