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Dollar Near 2-Week Low; Fed May Skip Raising Rates in September

Aug. 9 (Bloomberg) -- The dollar traded near a two-week low against the euro in Asia after the U.S. reported the slowest job creation since December, spurring speculation the Federal Reserve will refrain from raising interest rates next month.

The figures Friday called into question Fed Chairman Alan Greenspan's comment that a lull in spending would be ``short- lived'' and pushed the dollar down the most in more than six months. The dollar had rallied more than 3 percent since Greenspan spoke on July 20 until government figures showed employment growth eased for a fourth month in July.

``The current environment is U.S. dollar negative,'' said Robert Rennie, a currency strategist in Sydney at Westpac Banking Corp. ``The market's debating two or three rate hikes this year instead of three or four.''

Against the euro, the dollar traded at $1.2278 at 9:44 a.m. in Tokyo from $1.2280 late on Friday in New York, according to EBS, an electronic foreign-exchange dealing system. The U.S. currency was at 110.24 yen from 110.48, after falling 1.2 percent on Friday.

The dollar last week rose to a six-week high against the euro on speculation Fed would raise rates at its meeting tomorrow from 1.25 percent, and at each of its three meetings after that in 2004.

Nikkei Drops

Any decline in the dollar against the yen may be limited after the Nikkei 225 Stock Average dropped for the fifth day in six, renewing speculation demand for Japanese shares from overseas investors will not pick up soon. The average fell as much as 2.1 percent, increasing its one-month decline to 5.4 percent.

Foreign investors have more than halved their weekly average purchases of Japanese shares in the business year that started April 1 from the previous year. Investors abroad bought a net 102 billion yen ($925 million) of Japanese stocks this business year, according to Ministry of Finance figures Thursday. The purchases compare with a record 275 billion yen for the previous fiscal year, when the Nikkei rallied 47 percent.

``A slumping equity market undermines confidence in the Japan economy,'' said Tsutomu Soma, a currencies and derivatives trader in Tokyo at Okasan Securities Co. ``It just takes too much nerve to buy the yen in this environment.'' The yen may decline to 111 yen today, he said.

Almost 60 percent of the traders, investors and strategists surveyed on Friday from Tokyo to New York advised buying the euro against the dollar, up from 26 percent a week ago. About half said to buy Japan's currency, up from 35 percent.

The Labor Department said Friday that employers hired 32,000 new workers in July, an eighth of the median forecast in a Bloomberg News survey.

The reaction to the employment data ``suggests the market is not at the moment taking Greenspan at his word,'' said Jonathan Prince, head of foreign-exchange institutional sales at National Australia Bank Ltd. in Sydney. ``The U.S. dollar will continue on the soft side.''






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