FX look from Copenhagen

Coopenhagen -- The dollar rose to a four-month high against the yen and advanced versus the euro on speculation tomorrow’s U.S. payrolls report will show job losses have eased in a sign the world’s largest economy is recovering.

The greenback remained higher after the Labor Department reported today that fewer Americans than forecast filed claims for unemployment benefits last week. The yen fell against all of its major counterparts as Finance MinisterNaoto Kan said in his first day in office that he would welcome a weaker currency.

“The dollar is rallying into the nonfarm payrolls release,” said Kathy Lien, director of currency research at the online currency trader GFT Forex in New York. “Without jobs, you can’t have a meaningful economic recovery.”

The dollar appreciated 0.9 percent to 93.18 yen at 10:39 a.m. in New York, from 92.32 yesterday. It touched 93.40, the highest level since Sept. 1. The dollar climbed 0.6 percent to $1.4316 per euro, from $1.4408. The yen slid 0.3 percent to 133.41 per euro, from 133.01.

Sterling dropped to its lowest level in a week versus the dollar as Prime Minister Gordon Brown and the Conservative opposition clashed over how to cut the budget deficit. The FTSE 100 Index slid as much as 0.6 percent.

The Bank of England kept its benchmark interest rate at a record low 0.5 percent and its asset-purchase plan unchanged at 200 billion pounds ($318 billion), in line with the median estimate of economists in Bloomberg surveys.

Pound Versus Dollar

The pound fell as much as 0.8 percent to $1.5897, the lowest level since Dec. 30. Sterling was little changed at 89.88 pence per euro, compared with 89.94.

Norway’s krone declined 0.2 percent to 8.1820 per euro after a seven-day rally, the longest stretch of advances since August 2008. Industry Minister Trond Giske said the risk that the krone can become too strong is “evident” and that the government must take the currency into account when formulating fiscal policy.

The yen weakened earlier versus the dollar and euro as Kan said in Tokyo that he will seek to keep the yen at “an appropriate level while considering various impacts on the economy that may be caused by currencies.” While the yen has fallen 8 percent since reaching a 14-year high in November, “I hope it will correct a bit more,” he said.

Stance on Yen

Japan’s currency surged to 84.83 per dollar on Nov. 27, the strongest since July 1995, as then Finance Minister Hirohisa Fujii, who resigned yesterday, said he didn’t support a weak yen and opposed “easy intervention.” Central banks intervene by buying or selling currencies to influence exchange rates.

“It was reconfirmed that Kan doesn’t want a rising yen to hurt the economy in a clear difference from his predecessor,” said Keiji Matsumoto, a strategist at Nikko Cordial Securities Inc. in Tokyo

The dollar rose against the yen and euro before a report tomorrow that may show U.S. employers stopped cutting jobs in December. Nonfarm payrolls were unchanged after falling 11,000 in the previous month, according to the median estimate of 76 economists in a Bloomberg survey.

“If we get a weak payrolls report, the dollar will definitely weaken,” Ray Farris, the London-based head of foreign-exchange strategy at Credit Suisse Group AG, said in a Bloomberg Television interview. “If we get something close to consensus, we could see a relief rally and the dollar weakens. We need a strong number to help the dollar strengthen.”

U.S. Jobless Claims

U.S. initial jobless claims increased to 434,000 in the week ended Jan. 2, from a revised 433,000 in the prior week, the Labor Department reported today. The median forecast of 28 economists in a Bloomberg News survey was for an advance to 439,000 from a previously reported 432,000.

“The stabilization of jobless claims at lower levels is consistent with a stabilization in the labor market,” said Todd Elmer, currency strategist at Citigroup Inc. in New York. “That’s one of the factors supporting a benign assessment of the U.S. economy and some dollar strengthening.”

Australia’s dollar increased as much as 0.6 percent to 57.77 U.K. pence, the highest level in 25 years, after the South Pacific nation’s Bureau of Statistics said retail sales climbed 1.4 percent in November, the most in eight months. The median forecast of 12 economists in a Bloomberg News survey was for a 0.3 percent increase.

“This is the last retail sales print before the February policy meeting, and we continue to look for the Reserve Bank of Australia to hike the cash rate further,” Gareth Berry, a Singapore-based currency analyst at UBS AG, wrote in a note to clients today.

Swaps trading indicated a 62 percent chance that the central bank will increase the 3.75 percent target lending rate on Feb. 2, compared with 54 percent odds yesterday, according to a Credit Suisse index.