Treasury yields fell as the report dimmed speculation the Federal Reserve is close to dropping language from its statement that its benchmark rate will stay low for a ``considerable period.'' The Fed's target overnight rate of 1 percent has reduced demand for the dollar, driving it to record lows against the euro in each of the past five trading days.

Slow job growth ``keeps yields a bit lower for longer, and that's not really going to help the dollar,'' said Robert Lynch, a currency strategist in New York at BNP Paribas, France's largest bank. The labor market ``may not be improving as quickly as some people had hoped.''

The U.S. currency weakened to $1.2121 per euro at 10:30 a.m. from $1.2085 late yesterday. It fell to 107.94 yen from 108.21 yen yesterday, and reached the weakest since Nov. 19. The dollar is headed for a fourth straight week of declines against the euro, dropping 1 percent from a week ago. Lynch predicted the dollar will fall to $1.30 per euro by the end of next year.

Declines for the dollar accelerated after the Labor Department said U.S. non-farm employers added 57,000 workers last month, less than half the median forecast of economists polled by Bloomberg News, which had been for an addition of 150,000 new non- farm jobs. The unemployment rate fell to 5.9 percent from 6 percent in October.

The Fed will keep its target rate at 1 percent at a policy- setting meeting next week, according to all 58 economists surveyed by Bloomberg News, and has signaled it will do so until inflation quickens. The European Central Bank, which is raising its forecasts for prices and economic growth, yesterday kept its rate at 2 percent.

Unattractive Return

``All of a sudden people are starting to talk about rate differentials again,'' said Jan Faller, who manages international debt in New York at Deutsche Asset Management, with $660 billion in assets. He said he bought some euros about a week ago, as ``it was clear that the momentum wasn't really taking a breather.''

The euro may reach $1.25 in the first quarter, he said.

The interest-rate difference between Europe and the U.S. means investors receive higher returns on euro-denominated assets such as bank deposits. The yield on the two-year U.S. Treasury note is 1.90 percent, compared with 2.66 percent on German debt of the same maturity.

``You need to have a return to attract foreign capital and the interest-rate side of the equation will not give you an attractive return'' in the U.S., said Paul Podolsky, a currency strategist at FleetBoston Financial Corp. in Boston.

A separate government report today showed that U.S. factory orders in October rose 2.2 percent, the most in more than a year.

Inflation

In the U.S., the personal consumption expenditures price index, a measure of inflation favored by Fed Chairman Alan Greenspan, rose at an annual pace of 2.3 percent in the third quarter. That's lower than the 2.4 percent originally reported.

The Dollar Index, which charts the dollar against a basket of six currencies of U.S. trading partners, fell yesterday to as low as 89.24, the weakest since January 1997. The index reached a low of about 78 in 1992.

Traders may be reluctant to push the yen stronger than 108 per dollar on concern Japan will sell its currency to stem a 9.7 percent gain this year.

Zembei Mizoguchi, Japan's vice finance minister for international affairs, said the ministry is ``closely watching the market and will take action as necessary.''

The Bank of Japan, at the order of the Ministry of Finance, sold a record 17.8 trillion yen ($164 billion) this year to stem gains that threaten the country's export-led recovery.

Bank of Japan

``Any time the yen gets near or stronger than 108, the BOJ is likely to redouble its intervention efforts,'' said Koji Fukaya, currency strategist in Tokyo at Bank of Tokyo-Mitsubishi Ltd., a unit of Japan's third-biggest lender.

Japan will increase the amount of money the government can borrow to buy foreign currencies by 20 trillion yen to about 100 trillion yen, the Nihon Keizai newspaper reported, without saying where it obtained the information. Mizoguchi declined to comment on the report. The yen was at 130.85 per euro, from 130.75.

The European Central Bank will next week raise its projections for inflation and economic growth, a person who has seen the forecasts said yesterday. The bank will raise its inflation estimate for next year to 1.9 percent from a September projection of 1.6 percent and its 2004 growth forecast to 1.6 percent from September's 1.5 percent, the person said.

The regional currency has drawn support from speculation the ECB will raise interest rates before the U.S. and as recent data from Europe add to signs of economic recovery.

German industrial production rose 2.4 percent in October, a report today showed. Unemployment in Germany, the largest economy in Europe, dropped for a third month in November and factory orders gained in October, reports yesterday showed.