By Deborah Levine and William L. Watts, MarketWatch
NEW YORK (MarketWatch) — The dollar ended the week on a sour note versus the euro and Japanese yen on Friday, but losses were limited as traders made positions smaller ahead of this weekend’s meeting of global officials that may dictate how global currencies react to more quantitative easing from the U.S.
“It’s hard to make firm views ahead of this weekend when we’re at a fork in the road and each has different implications for the dollar,” said Ron Leven, senior currency strategist at Morgan Stanley.
Trading was volatile earlier in the session after a report showed the U.S. economy shed more jobs than economists had anticipated, especially in the government sector, solidifying expectations that the Federal Reserve will be more inclined to start a new asset-purchase program to prop up the economy.
The dollar index (DXY 77.18, -0.21, -0.27%) a measure of the U.S. unit against a basket of six major currencies, fell to 77.295, compared with 77.462 on Thursday. It dropped to 77.204 just after the jobs report was released.
The index has lost 1% this week and is down 0.7% this year.
The euro (EURUSD 1.3940, +0.0002, +0.0143%) rose to $1.3923, compared with $1.3914 in late North American trading on Thursday. It briefly jumped to $1.3984 earlier. See more tools on currency trading.
The euro has gained 0.9% against the dollar this week, though it’s still down 2.8% for 2010.
The British pound (GBPUSD 1.5963, +0.0094, +0.5923%) rose 0.5% to $1.5957.
The dollar had recently fallen to its lowest level since February against the euro amid creeping worries that the Fed will implement another round of bond-buying as part of a renewed quantitative-easing strategy as early as next month.
But traders and analysts saw no need for big moves after the U.S. jobs report, because quantitative easing was already priced in. However, the big question is how the rest of the world reacts to the Fed’s plan, which effectively devalues the dollar.
Also on traders minds, international finance officials will hold discussions this weekend on the sidelines of the International Monetary Fund and World Bank annual meetings in Washington. See stories on IMF meeting.
“I expect to see growing evidence of multilateral discomfort with currency policy” such as comments about cooperation, Leven said. “What China is going to do, well that we may not know for a while.”
The Labor Department said that U.S. private employers added 65,000 jobs in September, fewer than economists had forecast. Total employment, including government workers, fell by 95,000 last month. Read more on U.S. jobs data.
“Given the broad-based decline in employment during the recession, we would need to add 300,000 jobs per month for the next few years to get the unemployment rate down to an ‘acceptable’ level,” said Dan Greenhaus, chief economic strategist at Miller Tabak.
