The dollar traded near a five-week low against the yen on expectations an industry report will show U.S. manufacturing fell to a 10-month low in August. The Institute for Supply Management's index of manufacturing probably fell to 60 from 62 in July, based on the median estimate of 73 economists surveyed by Bloomberg News. The dollar yesterday had its biggest slide in two weeks after consumer confidence and Chicago-area manufacturing dropped more than forecast, suggesting the economy may extend a second-quarter slowdown.
``We've seen falls in all the recent data, which would suggest the ISM potentially will be below 60,'' said Robert Rennie, a currency strategist in Sydney at Westpac Banking Corp. the third-most accurate forecaster in Bloomberg surveys of 50 banks in the second-quarter. ``That's going to lead to more dollar selling.'' Against the yen, the dollar traded at 109.23 at 2:33 p.m. in Tokyo, according to electronic foreign exchange dealing system EBS, from 109.17 late in New York yesterday, when it fell as low as 108.74, the weakest since July 21. The dollar was also at $1.2180 per euro, from $1.2183. The National Association of Purchasing Management-Chicago yesterday said its regional index dropped to 57.3 in August from 64.7 in July, below the median forecast of 60. Readings greater than 50 signal growth. A separate report showed a drop in the Conference Board's gauge of consumer sentiment in August fell to 98.2 from a two- year high of 105.7 in July, less than the median forecast of 102.8. The U.S. economy grew an annual 2.8 percent from April through June, slower than the government initially estimated. `Precipice' The dollar may also decline on concern a report on Friday will show the pace of U.S. job creation fell short of economists' estimates for a third month. July's increase of 32,000 was an eighth of the median forecast of economists, prompting the dollar to tumble 1.8 percent against the euro as traders bet the Federal Reserve would slow the pace of interest rate increases. The central bank raised its key interest rate on June 30 by a quarter point to 1.25 percent and on Aug. 10 to 1.5 percent. The central bank said in statements accompanying those increases it plans to lift rates at a ``measured'' pace. Dallas Fed President Robert McTeer last week said he didn't think the economic recovery is ``in jeopardy'' and Fed Governor Ben S. Bernanke said consumer spending was rebounding in the third quarter. ``The Fed's recent upbeat macroeconomic view is sitting on a precipice,'' said Richard Yetsenga, currency strategist in Sydney at Deutsche Bank AG. Another below forecast jobs report ``will cause a lot of speculation over the Fed shifting its tightening cycle. It will certainly be enough to send the dollar down.''
`A Risk'
U.S. employers probably added 150,000 jobs in August, the most in three months and the first acceleration since March, according to the median estimate in a Bloomberg News survey where forecasts range from 50,000 to 250,000. ``Selling the dollar is a risk as we may well see good employment data,'' said Shimpei Uike, who invests in overseas debt for Asahi Life Asset Management in Tokyo, with the equivalent of $10.5 billion. ``The report could wipe out all the losses the dollar has suffered'' this week. A more-than- expected increase in U.S. jobs may cause the dollar to gain beyond $1.20 against the euro, he said.
European Manufacturing
Manufacturing in the dozen euro nations probably slowed in August, reflecting concern that a surge in oil prices and slowing global economic growth may curb the region's recovery, a survey showed. An index based on a survey of about 3,000 purchasing managers compiled for Group Plc by NTC Research Ltd. probably fell to 54.4 from 54.7 in July, according to the median estimate of 37 economists in a Bloomberg survey. The report will be published at 9:00 a.m. in London. The 30 percent surge in oil prices this year and slowing growth in the U.S. and Japan threaten to curb a European recovery that has relied on exports. In Germany, Europe's largest economy, business confidence fell for a third month in four in August. ``The European economy is certainly weak,'' said Jake Moore, currency strategist in Barclays Capital Inc. in Tokyo. The index ``may be slightly negative for the euro.'' The yen's 3 percent advance against the dollar from a two-month low on July 29 also may stall near its 200-day moving average of 108.69, according to a technical chart traders use to predict exchange rates.
The yen weakened beyond the 200-day moving average on May 7, falling 4.4 percent to an eight-month low of 114.88 on May 14. ``The 200-day line is on everyone's mind right now,'' said Toshihiro Azuma, manager of financial products and marketing at Sumitomo Trust & Banking Co. ``That will stand as a barrier.''
`Easier to Buy'
The yen also drew support as Japan's Nikkei 225 stock Average rose as much as 0.8 percent, halting a two-day decline. The index last week had its biggest weekly gain on two months. ``A gain in the Nikkei makes it easier to buy the yen,'' said Masashi Hashimoto, manager of the foreign exchange and treasury division in Tokyo at Bank of Tokyo-Mitsubishi Ltd., a unit of Japan's second-biggest lender. ``It will increase the attractiveness of investing in Japanese stocks for foreign investors. In addition, weaker U.S. data yesterday may also support yen strength against the dollar.'' In other trading, the dollar was at 1.2666 Swiss francs from 1.2664. The British pound bought $1.8010 from $1.8024. ///www.bloomberg.com