July 5 (Bloomberg) -- The dollar may decline against the euro and the yen this week on expectations the Federal Reserve will keep to a plan to raise its interest rate target at a ``measured'' pace, a Bloomberg News survey indicates.

Seventy-six percent of the 71 traders, investors and strategists from New York to Tokyo polled by Bloomberg News on Friday advised buying or holding the yen against the dollar, up from 71 percent last week. Sixty-seven percent said buy or hold euros for dollars, up from 40 percent.

The dollar fell to a three-week low on Friday after the Labor Department said the U.S. economy added 112,000 jobs in June, less than half the median forecast of economists polled by Bloomberg. The report damped speculation Fed policy makers will quicken the pace of rate increases after lifting their target rate by a quarter point to 1.25 percent on Wednesday.

``The dollar has to weaken from here,'' said Roger Kubarych, 59, a former Fed economist who is now senior economic adviser in New York at HVB Group, Germany's second-largest bank. ``The jobs report absolutely reinforced the Fed's judgment on interest rates and it raised the question if there's going to be another increase in August.''

The dollar fell 1.1 percent against the euro last week to $1.2319. Prior to Friday's jobs figures, the dollar was up 0.2 percent from the previous five-day period. Compared with the yen, the U.S. currency rose 0.6 percent to 108.36, the first weekly advance in a month.

Trading may be less than usual on Monday as U.S. markets will be closed in observance of the Independence Day holiday.

`Bit of Catch Up'

The increase in U.S. non-farm payrolls in June was less than predicted by any of the 73 economists polled by Bloomberg. The median forecast was for an increase of 250,000. Gains in the previous two months were revised down by a total 35,000, to 235,000 in May and 324,000 in April.

``There's nothing out there next week to divert attention away from Friday's disappointing payrolls number,'' said Ian Gunner, 41, a currency strategist in London at Mellon Financial Corp., referring to the absence of major economic reports. ``The yen didn't move much on Friday and it may play a bit of catch up on Monday as Asian players come in and sell the dollar against their currency.''

`Dollar Under Pressure'

In a statement with its decision on Wednesday, the Fed kept the word ``measured,'' first used in May, to describe its approach to future rate increases. The dollar rose against the euro in the last two quarters, the first such back-to-back gains since 2002, and Fed policy makers need to signal they will accelerate the pace of increases in order for the dollar to keep rising, traders said. The Fed's next rate meeting is Aug. 10.

``There is no indication the Fed will be pre-emptive,'' said Tommy Ong, vice president of the treasury and markets in Hong Kong at DBS Group Holdings Ltd., Southeast Asia's largest lender. ``That's put the dollar under pressure.''

Traders are trimming bets the Fed will raise its rate to 2 percent by year-end. The yield on the September Eurodollar futures contract dropped 5.5 basis points to 1.94 percent, and is down from 2.245 percent on June 14. The contract settles at the 90-day London interbank offered rate, or Libor, which has averaged about 23 basis points more than the Fed's target over the past 10 years. A basis point is 0.01 percentage point.

Tremonti Resigns

Among the 48 survey participants who offered an opinion on the euro versus the yen, 23 percent advised selling the euro, 12 said to buy it and 13 wanted to hold the currency shared by a dozen European Union nations.

The survey was taken before Italian Finance Minister Giulio Tremonti quit Saturday after three years in office. He resigned after Prime Minister Silvio Berlusconi's party lost support in European elections as the economy struggled to grow. Berlusconi has taken on the role of interim finance minister.

Italy's economy stagnated in 2002 and 2003 and has struggled to recover this year. Gross domestic product in the euro region rose 0.6 percent in the first quarter from the previous three months. The U.S. economy grew at an annual 3.9 percent rate and Japan's expansion accelerated to 6.1 percent, on an annualized basis.

The dollar appreciated 1 percent against the euro last quarter for its first back-to-back quarterly advance against Europe's single currency since 2002. The dollar rose 4.3 percent compared with the yen. Since May 30, the yen has strengthened 2 percent versus the dollar and 1.5 percent against the euro on signs Japan's economic growth is accelerating.

``The yen is a buy,'' said Masashi Matsuzawa, 35, manager of trading in Singapore at Mizuho Corporate Bank Ltd., a unit of Japan's largest lender. ``The economic outlook for Japan is pretty strong and the recovery looks sustainable.''

`Very Good Position'

A Bank of Japan survey showed last week the nation's executives are the most confident about the economic outlook in 13 years. Japan's economic revival is encouraging international investors to buy stocks. Foreigners were net buyers of Japanese stocks in three of five weeks through June 25, figures released last week from the Tokyo Stock Exchange show.

``Japan is in a very good position to benefit from global growth,'' said Daniel Katzive, 36, a currency strategist in Stamford, Connecticut at UBS AG, the largest currency trader, according to Euromoney magazine. ``But the yen might be once again getting close to levels that may not be in the interest of Japanese authorities.''

The yen will strengthen to 105.72 at year-end, a level unseen since April, according to the average of 50 forecasts received between June 21 and June 29. The yen hasn't traded at 100 since 1995.

Prime Minister Junichiro Koizumi's government spent a record 14.8 trillion yen ($14 billion) in the first quarter buying dollars, according to Ministry of Finance figures. Japan probably won't sell yen again until it reaches about 103.5 per dollar, said Paul Chertkow, head of global currency research at the Bank of Tokyo-Mitsubishi Ltd. in London.

Following are the results of the survey:

                      BUY      SELL      HOLD


Euro                   30        23        18
Yen                    43        21        11
British Pound          27        26        22
Swiss Franc            34        19        22
Australian Dollar      37        20        16

Demand for the euro against the yen:

                      BUY      SELL      HOLD
                       12        23        13

To contact the reporter on this story: Vivianne C. Rodrigues in New York at at vrodrigues@bloomberg.net.

Last Updated: July 4, 2004 16:33 EDT