Worries about Italy keep the euro lower
By Deborah Levine and Lisa Twaronite, MarketWatch
NEW YORK (MarketWatch) — The dollar pared gains against the euro and turned lower against other major currencies on Friday as worries about Italy getting sucked into Europe’s debt crisis overshadowed a much weaker-than-anticipated U.S. payrolls report.
Analysts noted reports of a scandal surrounding Italy’s finance minister sending the country’s bond yields up sharply and weighing on the shared currency.
“It’s difficult to want to invest in anything, especially with Europe, Japan and China, and then confidence in the States was shot again this morning,” said Dean Popplewell, chief currency strategist at Oanda Corp.
The dollar index DXY +0.11% , which measures the U.S. unit’s value against a basket of six major currencies, traded at 74.883, down from 75.330 prior to the report and turning lower from 74.938 late Thursday.
The euro EURUSD -0.30% stayed down, however, buying $1.4334 versus $1.4353 in late North American trading Thursday. See real-time currency quotes and tools.
Against the Japanese yen, the dollar USDJPY -0.81% fell to ¥80.61 from ¥81.23 late Thursday. The yen is more sensitive to changes in U.S interest rates, which turned sharply lower after the report. Lower rates make foreign investors less inclined to convert their currencies into dollars to buy U.S debt. Read story on falling U.S. bond yields.
It also turned lower against the British pound, GBPUSD +0.56% which rose to buy $1.6073 from $1.5968 Thursday..
The Australian dollar AUDUSD -0.42% slipped to $1.0744 from $1.0773 late Thursday, following commodities and equities, which fell markedly.
`Waiting for a magic bullet’
The dollar wavered then slowly gave up some gains after the U.S. Labor Department said the economy added 18,000 jobs in June, fewer than analysts expected and an unexpected decline from May, which was also revised lower. Read about nonfarm payrolls.
“Not even the most pessimistic economist on Wall Street expected such a weak print, which explains why we have seen such a violent reaction in the dollar,” said Kathy Lien, director of global research and analysis at GFT. “Europe has its own problems, but the pace of the U.S. recovery has fallen far short of everyone’s expectations.”
A handful of economists and analysts again raised the possibility of the Federal Reserve embarking on another round of stimulus. The central bank is still considered unlikely to engage in a third round of bond buying, or quantitative easing, so soon after finishing the second round last week.
“Markets are telling you [that] all this government and Fed stimulus has done very little to the job environment,” Popplewell said. “Realistically, we have to hope and wait for the existing stimulus to go through the system and for some expansion to occur. We’re waiting for a magic bullet.”
ADP, Japan reports
The data followed a report on Thursday from Automatic Data Processing Inc., which showed private-sector employment rose 157,000 in June, more than double the 70,000 increase economists expected. Read more on ADP report.
Japanese government data released earlier Friday showed the country’s current-account surplus for May was sharply down from the year-earlier month due to the impact of the March disaster, but still came in better than economists had expected.
Japan’s surplus slipped 51.7% to 590.7 billion yen, but that was better than economists’ median forecast for a 77.5% drop, according to a survey by Japanese business daily Nikkei and Dow Jones Newswires.
For the week, the dollar index is up 0.7% and the euro has declined 1.3%. China made news by unexpectedly raising interest rates to slow its growth and inflation.
Deborah Levine is a MarketWatch reporter, based in New York.
Lisa Twaronite is MarketWatch's Tokyo bureau chief.
