May 8 (Bloomberg) -- The dollar fell to a more than seven- month low against the yen as a U.S. government report showed the economy added fewer jobs than forecast in April, bolstering speculation the Federal Reserve will stop raising interest rates.
Bank of Japan Governor Toshihiko Fukui yesterday told reporters the Japanese economy is ``completely on track for a sustained recovery'' and the bank is ``open'' to lifting rates from near zero percent. The Fed will probably increase rates this week for the last time until at least August, most of Wall Street's biggest bond trading firms said.
``It's going to be a tough road for the U.S. dollar,'' said Michael Thomas, head of strategy and economics in Sydney at ICAP Australia Ltd., a unit of the world's largest inter-bank broker. The BOJ may raise rates as soon as July and ``the interest-rate differential would start to look less attractive.''
The dollar traded at 112.18 against the yen as of 9:09 a.m. in Tokyo, from 112.58 late in New York on May 5. It fell as low as 111.88, the weakest since Sept. 23. The U.S. currency was at $1.2742 per euro from $1.2727 last week, when it reached $1.2765, the lowest since May 12.
Japanese financial markets were closed for the last three business days of last week for Golden Week national holidays.
Yen gains were supported after officials from George W. Bush's administration said the U.S. Treasury Department is unhappy with efforts by Japan to slow the currency's gains since a meeting of the Group of Seven last month called for stronger Asian currencies.
`Excessive' Dollar Decline
The Treasury objects to what it sees as an attempt by Japan to reinterpret the G-7 statement, said the officials, who asked not to be named. The statement called on China and other developing Asian nations to allow their currencies to rise to help reduce lopsided global trade flows.
Japanese Finance Minister Sadakazu Tanigaki told reporters in India last week that investors had misinterpreted the G-7 statement as a call for a weaker dollar. He said recent declines in the dollar against the yen were ``excessive.''
The yen is up 4 percent versus the dollar since the comments from central bankers and finance ministers from the G-7 on April 21.
The U.S. government said May 5 that the economy added 138,000 jobs in April, the least since October and less than the 200,000 predicted by the median forecast in a Bloomberg survey.
Economists at all 22 securities firms that trade with the central bank said last week that Fed officials will boost their target rate a quarter-percentage point to 5 percent when they meet May 10. Seventeen of the so-called primary dealers said that will be the last increase until at least August.
Sixty-five percent of 51 traders, strategists and investors surveyed May 5 from Mumbai to New York advised buying the yen against the dollar this week, a Bloomberg survey showed.
