Euro holds steady as German cabinet backs EFSF changes
By Deborah Levine and William L. Watts, MarketWatch
NEW YORK (MarketWatch) — The U.S. dollar lost ground against major currencies on Wednesday, with a slightly weaker-than-expected report on private U.S. payrolls growth failing to curb gains by equities.
Overall activity remains subdued as investors continued to assess prospects for further monetary stimulus by the Federal Reserve.
The dollar index DXY -0.11% , which tracks the U.S. currency against six major currencies, fell to 73.893, from 73.934 before the report and versus 73.968 in late North American trading on Tuesday.
The euro EURUSD -0.01% traded near flat at $1.4439 versus $1.4442 Tuesday.
The British pound GBPUSD +0.10% rose to $1.6319, from $1.6310.
Against the Japanese yen, the dollar USDJPY -0.09% slipped to ¥76.60, down from ¥76.67 on Tuesday.
Payrolls provider ADP said U.S. companies hired 91,000 workers in August, a little fewer than economists estimated. But the number wasn’t disastrous, easing worries about Friday’s more important, broader nonfarm payrolls report from the Labor Department. See story on ADP jobs report.
“ADP has been a poor predictor of nonfarm payrolls but everyone was relieved to see that there was not a huge change in private sector job growth,” said Kathy Lien, director of currency research for GFT. “If ADP fell to 50,000, we would have probably seen the dollar sell off aggressively but the number wasn’t bad.”
Along with another report earlier on employment, the data doesn’t “suggest the need for any position adjustments ahead of Friday’s non-farm payrolls report,” Lien said.
The data boosted U.S. stock futures. Stocks opened higher and gained strength after a regional manufacturing index. The Standard & Poor’s 500 Index SPX +1.18% rose 1.2% and the Dow Jones Industrial Average DJIA +0.96% was up 122 points at 11,682.
Fed redux
The minutes from the Federal Reserve’s latest policy meeting released Tuesday showed some dissent on whether to take more action to help the U.S. economy. Strategists said the minutes show the bar for further action by the Fed continues to decline, to the potential detriment of the dollar. Read more on dollar, Fed minutes.
“The main new piece of information in the minutes of the August FOMC meeting was that a few members stood ready to do more,” said strategists at Barclays Capital.
It also helped boost equities and other “risky” assets, although risk-related correlations may be deteriorating, analysts said.
The message from the minutes was that “mad money is here to stay whether one or two FOMC members dissent or not,” said Kit Juckes, head of foreign exchange at Societe Generale. “This helped ‘risk’ rebound, though it should be said that if the dollar benefits less and less from safe-haven status, risky assets are getting less and less of a lift from the panacea of cheap money in each crisis.”
The result, he said in a note, is “a nervous, slightly directionless market.”
The euro was buoyed in earlier activity after German Chancellor Angela Merkel’s cabinet approved draft legislation to revamp the euro-zone bailout fund, setting the stage for a crucial parliamentary vote on Sept. 29. Read more on Merkel, bailout fund.
For the month, the dollar has bounced a lot against the euro, but the single currency remains up 0.4%. For the year, the euro has returned 7.8%.
The dollar index is little changed for August and fallen 6.5% so far in 2011.
