Dollar strengthen versus major currency after traded near a two-month low against the euro before an industry report that may show U.S. companies cut jobs in June, indicating the economic slowdown is deepening.
The U.S. currency also weakened on speculation the European Central Bank will start raising interest rates tomorrow, while the U.S. government will probably say joblessness increased, prompting traders to pare bets the Federal Reserve will lift borrowing costs. The Australian dollar approached a 25-year high after retail sales grew at the fastest pace in six months.
``The risk environment isn't conducive for the dollar at the moment,'' said Kamal Sharma, a currency strategist in London at JPMorgan Chase & Co. ``The ECB is likely to produce a quarter- point rise tomorrow and the market is looking for more beyond that.''
The dollar traded at $1.5795 by 10:56 a.m. in London, from $1.5793 yesterday. It weakened earlier to $1.5848, the lowest April 24. The U.S. currency was at 106.45 yen, from 106.13 yesterday. The euro rose 0.3 percent to 168.14 yen.
Traders added to bets on higher euro-area interest rates as ECB President Jean-Claude Trichet said inflation may ``explode'' if central banks aren't decisive. The euro stayed stronger after the European Union said producer prices in the region rose to a record 7.1 percent in May
The Australian dollar gained as much as 0.8 percent against the dollar as a government report showed retail sales climbed 0.7 percent in May from the previous month. The currency, which advanced to 96.68 U.S. cents on June 30, the highest level since February 1983, traded at 95.90 cents, from 95.50 cents yesterday.
Korean Won
South Korea's won climbed to 1,037.90 per dollar from 1,046.91 on speculation the central bank sold dollars to bolster the local currency and contain inflation. South Korea didn't artificially try to move the won, Finance Minister Kang Man Soo said today at a briefing in Gwacheon.
ADP Employer Services will say U.S. companies cut 20,000 workers in June, based on the median forecast in a Bloomberg News survey of economists before the report at 8:15 a.m. in New York. After accounting for government workers, the U.S. lost 60,000 jobs last month, a separate Bloomberg survey showed before Labor Department figures tomorrow.
The dollar weakened 1.2 percent against the euro and 1 percent versus the yen on June 6 when the government reported the U.S. lost 49,000 workers in May.
`Weak Results'
``The concern is that the numbers could be worse than expected and the risk is that we could see the euro move to $1.60 relatively quickly,'' Simon Derrick, chief currency strategist in London at Bank of New York Mellon Corp., said in a Bloomberg Television interview. ``I'd be short dollar going'' into the data. A short position is a bet a currency will decline.
Futures on the Chicago Board of Trade show a 25 percent chance the Fed will raise its 2 percent target rate for overnight lending between banks by a quarter-percentage point at its meeting on Aug. 5, compared with 38 percent odds a week ago.
The dollar has also come under pressure as oil surged to a record. Crude oil for August delivery rose to $142.45 a barrel today, before trading at $141.88.
The euro-dollar exchange rate and oil have moved in the same direction 90 percent of the time in the past year, according to Bloomberg calculations based on the correlation of their value changes. Oil increased to a record $143.67 a barrel on June 30 as the euro reached a three-week high.
`Under Pressure'
``If oil prices remain persistently higher, the dollar is most likely to be under pressure,'' said Boris Schlossberg, a senior currency strategist in New York at DailyFX.com, an online currency dealer.
Traders raised bets on higher ECB interest rates after Trichet's comments. The implied rate on the December Euribor interest-rate futures contract rose 4 basis points to 5.28 percent.
The central bank will lift its benchmark rate a quarter- percentage point to 4.25 percent, according to 57 of 58 economists surveyed by Bloomberg.
``If we're not decisive, there's a risk of inflation exploding,'' Die Zeit newspaper today quoted Trichet as saying. ``If we act in a decisive way, we can master the situation.'' ECB executive board member Lorenzo Bini Smaghi said yesterday the bank's inflation-fighting mandate means it acts faster than the Fed.
The ECB has kept its benchmark rate at 4 percent since June last year while the Fed lowered rates seven times between September and April, from 5.25 percent to 2 percent.
The Canadian dollar, which last bought 104.28 yen, may fall to its lowest level in more than two months versus the Japanese currency should it drop below so-called support at 102.51 yen, said technical analysts at Citigroup Global Markets Inc.
`Double Top'
The support level is the neckline of a pattern known as a double top, according to Citigroup's chart. The pattern forms when a currency makes two successive peaks of about the same height. The neckline passes through the lowest point of the double top. Support is where buy orders may be clustered.
``A breach of that level would suggest that a double top formation is in place, which would target 97.94,'' analysts led by Tom Fitzpatrick, New York-based global head of currency strategy at Citigroup, wrote in a research note yesterday.
To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Stanley White in Tokyo at swhite28@bloomberg.net
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