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.
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.
“It’s not a green light for Mr. Bernanke to announce QE3 tomorrow, but it certainly says that the conditions under which some FOMC members will be pushing the case for further easing measures are falling into place,” said Ray Attrill, a senior currency strategist at BNP Paribas SA in New York.
The Fed bought $2.3 trillion of securities in two rounds of quantitative easing from December 2008 to June 2011.
Spain, the euro-region’s fourth-largest economy, is in “extreme difficulty,” Prime Minister Mariano Rajoy said April 4, raising the possibility of a bailout for the second time this week. Spanish bonds fell yesterday, pushing the yield on the 10- year benchmark bond to as high as 5.84 percent today, the most since December, and widening the spread with similar-maturity German bunds to more than 4 percentage points.
The yield on Spain’s 10-year benchmark bond has jumped nearly one percentage point since March 2, when Rajoy announced the government would miss its budget-deficit target this year. He warned that public debt will surge to a record 79.8 percent of GDP this year as it imposes the deepest austerity in at least three decades.
German exports probably decreased 1.2 percent in February from January, when they rose 2.4 percent, according to the median estimate of economists surveyed by Bloomberg News before the report due on April 10. In France, output increased 0.2 percent in February, after gaining 0.3 percent the prior month, another poll showed before the nation’s statistics office releases data the same day.
The euro has declined 1.2 percent in the past week, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen has gained 2.8 percent and the dollar has appreciated 1 percent.
Markets in Hong Kong, Australia, New Zealand, Singapore and India are closed today for a public holiday.