Australian dollar soars after better-than-expected GDP
By Deborah Levine and Lisa Twaronite , MarketWatch
NEW YORK (MarketWatch) — The dollar lost ground Wednesday after payroll-processing company ADP said the U.S. economy added 38,000 jobs in May, far fewer than the 175,000 economists expected.
“That is a shockingly bad ADP number,” said Tom di Galoma, managing director of government securities at Oppenheimer & Co.
The dollar index DXY -0.27% , which measures the U.S. unit against a basket of six major currencies, slipped to 74.449 from 74.514 before the data and from 74.644 in late North American trading Tuesday.
Among the more notable moves after the ADP data, the Japanese yen strengthened against the euro and dollar, signaling that investors are moving back toward the low-yielding currency and away from riskier assets.
Against the Japanese yen, the dollar USDYEN -0.6749% bought ¥80.90, down from ¥81.31 late Tuesday.
The euro EURUSD +0.2293% fell to buy ¥116.64, down from ¥116.92.
Against the dollar, the euro EURUSD +0.2293% pared losses to buy $1.4416, up from the day’s low of $1.4383 and from $1.4377 Tuesday. See real-time currency quotes and tools.
ADP said employment in the nonfarm private business sector rose a seasonally adjusted 38,0000 in May, well below the 175,000 gain expected by economists. Read about ADP jobs data.
The data came two days before the more closely followed monthly Labor Department employment report, which includes government jobs. Economists polled by MarketWatch expect Friday’s payrolls report to show a gain of 175,000 jobs, which would still be slower than the 244,000 added in April.
“It is a warning shot across the bow that job growth is also weakening along with the other high-frequency numbers,” said Eric Green, chief market economist at TD Securities Inc.
Before the U.S. data, traders had focused on continued hopes that a resolution to Greece’s debt woes and a new austerity plan could be near.
European Union policy makers are “struggling to reach a consensus on an acceptable degree of ‘burden-sharing’ between the private and public sector — a necessary condition for additional financial support to Greece,” said Frederik Ducrozet, economist at Credit Agricole, in a note to clients.
The euro lost 3.1% against the dollar in May as worries about Greece’s solvency returned to the forefront. See recent story on Greece.
No-confidence vote in Japan
The yen was also under pressure before the U.S. data amid a developing political crisis in Japan, which could spook foreign investors and lead them to sell their yen assets.
Japanese opposition parties will reportedly submit a no-confidence motion against Prime Minister Naoto Kan’s government on Wednesday, and the lower house could vote on it Thursday. Read more on Japan's Kan.
“The likely resignation of the fiscal-consolidation-oriented Kan Cabinet could put a brake on Japan fiscal reconstruction and thereby negatively affect the [Japanese government bond] market, sending buyers back to waiting-and-seeing mode,” said RuiXue Xu, a rates strategist in Tokyo at RBS Securities Japan Ltd., in a note to clients Wednesday.
“But, on the other hand, the rise of yields will provide good opportunities for investors who are willing to buy on dips after the new month began,” Xu added.
Australian dollar
Australia’s dollar gained after the country’s gross domestic product shrank less than expected in the first quarter of 2011. The Australian dollar AUDUSD +0.7883% rose to $1.0743, up from $1.0661 Tuesday.
Data from the Australian Bureau of Statistics showed the economy contracted by 1.2% in the first quarter of 2011 and grew by 1% on an annual basis to the end of March. Economists had been expecting a 1.4% contraction in the quarter and 0.7% growth for the year, according to Dow Jones Newswires. Read more on Australian GDP data.
The British pound GBPUSD -0.2554% turned down to $1.6406 from $1.6438 late Tuesday.
