Dollar falls as US payrolls trail forecast, adding to Fed bets

April 6 (Bloomberg) -- The dollar fell against the yen and euro after U.S. employers added fewer jobs than forecast in March, reviving bets the Federal Reserve will increase stimulus, or quantitative easing, which may debase the currency.

The 17-nation euro headed for the biggest weekly drop in 11 months against the yen as Spain’s rising borrowing costs fueled concern that the region is failing to contain its debt crisis. Currencies of commodity-exporting countries fell as speculation the U.S. economic recovery is faltering overshadowed the prospect of further Fed easing. The currencies of Mexico and Canada, whose biggest trade partner is the U.S., weakened.

“Dollar-yen is trying its best to do a nose dive,” said Sebastien Galy, a senior foreign-exchange strategist at Societe Generale SA in New York. “The payrolls number will reinforce people looking for the quantitative-easing argument.”

The dollar weakened 1 percent to 81.54 yen at 10:01 a.m. in New York, touching the lowest level since March 8. It fell 0.2 percent to $1.3085 per euro. The shared currency lost 0.9 percent to 106.69 yen, extending its weekly decline to 3.5 percent, the most since May.

Futures on the Standard & Poor’s 500 Index fell 1.1 percent. Australia’s dollar was little changed at $1.0303 and South Africa’s rand fell 0.6 percent to 7.8839 per dollar.

Jobs Data

Nonfarm payrolls increased by 120,000 last month, the smallest increase in five months, the Labor Department reported today. Economists had forecast an addition of 205,000, according to the median of 75 estimates in a Bloomberg News survey. The unemployment rate fell to 8.2 percent, the lowest since January 2009.

The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six U.S. major trading partners, lost 0.3 percent to 79.855.

Mexico’s peso fell the most against the dollar among the 16 major currencies tracked by Bloomberg, dropping 1.1 percent to 13.0174. Canada’s dollar weakened 0.4 percent to 99.68 cents per U.S. dollar.

While the Federal Open Market Committee, led by Chairman Ben S. Bernanke, has pledged to keep its interest rate at a record low of zero to 0.25 percent through 2014, it’s holding off on increasing monetary accommodations unless the U.S. economic expansion falters or prices rise at a rate slower than its 2 percent target, according to minutes of the central bank’s March 13 meeting released April 3.

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