CURRENCY : Dollar Sinks to 11-Month Low Against Japan’s Yen

The dollar closed mostly higher Friday but fell to its lowest level in nearly a year against the Japanese yen in a session traders called uneventful.

The dollar firmed slightly in reaction to a government report showing the nation’s jobless rate rose to 5.6% in August from 5.5% the month before, traders said.

“I think people were anticipating a far worse figure,” said Harlan Matusow, an assistant vice president in currency trading at the New York office of Bank Julius Baer & Co.

Analysts said a bad unemployment report could have persuaded the Federal Reserve to ease credit. Lower interest rates tend to weaken the dollar.

Much of the dollar’s advance appeared to stem from investors covering short positions by buying dollars, Matusow said.

Traders who anticipated a worse unemployment report, and had been selling dollars, decided to cover their positions, he said.

In addition, since the start of the Iraqi crisis, investors have been afraid to hold short positions over weekends for fear the dollar’s value could be adversely affected by events before the market reopens on Monday, he said.

Dealers said the yen continued to show strength as investors repatriated dollars to Japan ahead of the closing of a six-month financial reporting period at the end of September.

“Over the past week the Japanese have been selling U.S. assets, covering dollars into yen,” said George Eckhardt of Paine Webber Group Inc. Part of the reason is to cover losses on the Tokyo stock market, he added. Tokyo stocks rose Friday after four days of declines.

In Tokyo, the dollar closed at 140.25 yen, down from 141.65 yen at Thursday’s close. Later, in London, it fell to 140.15 yen. In New York, the dollar was quoted at 140.05 yen at late afternoon, down from 140.65 late Thursday.

The dollar rose against the British pound. The pound cost $1.8933 in London, cheaper than $1.9075 late Thursday.

In New York, the pound was quoted at $1.8930 at late afternoon, down from $1.9125 late Thursday.

British Chancellor of the Exchequer John Major said sterling won’t join the exchange rate mechanism of the European Monetary System during a weekend meeting of European finance officials.

Rumors that the pound will join the mechanism have helped support the currency during recent months.

Other late dollar rates in New York, compared to late Thursday’s rates, included: 1.5680 German marks, up from 1.5560; 1.3055 Swiss francs, up from 1.2975; 5.2530 French francs, up from 5.2135; 1,170.50 Italian lire, up from 1,161.50, and 1.1634 Canadian dollars, up from 1.1563.