Dollar, Yen Hold Drops Against Majors as ECB Plan Boosts Stocks

The dollar and the yen maintained losses against most major peers as demand for haven assets waned following the European Central Bank said it will buy government debt to help prevent a break-up of the euro zone.

The dollar held declines against higher-yielding currencies before the U.S. government releases its monthly jobs report. The euro traded 0.2 percent from a two-month high after ECB President Mario Draghi said policy makers agreed to the unlimited bond-purchase program to reduce interest rates for struggling nations.
“The markets turned risk-on after Draghi delivered what was expected,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp., a currency-margin company. “The dollar and yen are being sold while stocks and the Aussie are climbing.”

The greenback was little changed at $1.2630 per euro as of 8:29 a.m. in Tokyo from yesterday, when it touched $1.2652, the weakest since July 2. The yen was at 99.66 per euro from yesterday, when it touched 99.81, the weakest since July 5. Japan’s currency lost 0.1 percent to 78.91 per dollar.
Australia’s dollar traded at $1.0277 after surging 0.9 percent to $1.0284 yesterday.

On the week the dollar is down 0.4 percent against Europe’s currency and the yen has lost 1.1 percent.
The MSCI World Index of shares jumped 1.9 percent yesterday, while the Standard & Poor’s 500 Index climbed 2 percent, the most since June.

ECB Plan

Draghi said yesterday the ECB will target government bonds with maturities of one to three years, including longer-dated debt that has a residual maturity of that length. Purchases will be fully sterilized, meaning the overall impact on the money supply will be neutral, and the ECB will not have seniority, he said. The central bank left its benchmark interest rate at 0.75 percent.

“The ECB’s decision is likely to lend some support to the euro for a while,” said FX Prime’s Ueda.
The dollar fell against currencies linked to risk sentiment amid speculation the U.S. jobs report today may show slowing labor market strength last month, bolstering the case for the central bank to undertake further monetary easing.

U.S. employers probably added 130,000 jobs last month, down from 163,000 in July, according to the median estimate of economists surveyed by Bloomberg News before the Labor Department releases its figures today.

Federal Reserve Chairman Ben S. Bernanke has said the lack of jobs growth is a “grave concern.” The unemployment rate has held above 8 percent since February 2009.

Separate reports yesterday painted a more optimistic picture of the U.S. employment market. Jobless claims decreased by 12,000 to 365,000 in the week ended Sept. 1, the Labor Department reported in Washington. Private employers expanded payrolls by 201,000 in August, according to figures from Roseland, New Jersey-based ADP Employer Services, exceeding the 140,000 median gain forecast by economists in a Bloomberg survey.

To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net