Yen rises to seven-week high

The yen touched a seven-week high against the dollar amid gains across the board on Wednesday, as a worse-than-expected US private-sector jobs report boosted the safe-haven appeal of the Japanese currency. The yen also jumped to seven-week highs against the euro and sterling as the data, which came two days ahead of the US government's August unemployment report, added to uncertainty about the US labour market and helped prolong risk aversion.
"The outlook for non-farm payrolls is not clear. There's hesitancy in the currency market and it's being reflected in equities as well," said Kathy Lien, director of currency research at GFT Forex in New York. Private employers cut 298,000 jobs in August, according to the ADP Employer Services report, jointly developed with Macroeconomic Advisers LLC.
Economists had expected job losses of 250,000, although the number was fewer than a revised 360,000 lost in July. In late afternoon New York trading, the dollar fell 0.8 percent to 92.14 yen after hitting a low of 92.07, according to Reuters data, its lowest since mid-July.
The yen was up 0.9 percent against the Canadian dollar, 0.3 percent against the Swiss franc, 0.5 percent against the euro and 0.2 percent against the pound. The dollar index, valuing the US currency against a basket of other major units, was last down 0.5 percent at 78.391.
Against the dollar, the euro recouped earlier losses and last traded up 0.3 percent at $1.4264. It touched $1.4175 on Tuesday, the lowest since August 19. The European Central Bank is widely expected to keep interest rates at 1.0 percent on Thursday, with ECB President Jean-Claude Trichet likely to caution against growing talk of a full-blown euro zone economic recovery.
On Friday, the US government will release the non-farm payrolls report for August, which includes public and private sector jobs. Economists polled by Reuters expect job losses of 225,000 for August. Some traders said yen gains were being driven by short-term speculators building long yen positions ahead of the Labour Department report. A weak reading may drive the dollar/yen down to the 90 yen mark, they said.
"The trend is improving, but the bottom line, though, is that the US economy is still bleeding jobs, and as a result we're seeing selling in risk trades in the currency market," said Win Thin, senior currency strategist at Brown Brothers Harriman in New York.
In other trading, the Australian dollar rose 0.9 percent to $0.8338 after data showed Australia's economy grew at its fastest pace in more than a year last quarter, supporting the case for an early rise in interest rates. The release of minutes of the US Federal Reserve's August policy meeting had little impact on trading.