By Deborah Levine and William L. Watts, MarketWatch
NEW YORK (MarketWatch) — The dollar turned up on Friday after a government report showed the U.S. economy added more jobs than forecast in December as the unemployment rate unexpectedly declined.
The euro EURUSD -0.27% fell to $1.2735, down from $1.2790 earlier and from $1.2775 in late North American trading Thursday. The shared currency had slipped below $1.28 for the first time in 16 months on Thursday, amid worries about European bank capital.
The dollar index DXY +0.36% , a measure of the greenback’s performance against a basket of six major currencies, rose to 81.223, up from 80.930 before the data and from 80.925 late Thursday.
David Watt, currency strategist at RBC Capital Markets, said the technical focus is on the 81.44 level, which marks a December 2010 and January 2011 double top.
The Labor Department said the economy added 200,000 jobs in December, more than analysts expected. The unemployment rate unexpectedly fell to 8.5%, off from a revised 8.7% in November. Read more about payrolls data.
ADP report beat estimates
On Thursday, the dollar rose after private-sector payrolls data from Automatic Data Processing Inc. trounced estimates, feeding expectations for a strong December reading on nonfarm payrolls.
Strategists noted that the reaction marked a break from the typical “risk-on” response to strong data. This had previously seen the safe-haven currencies such as the dollar weaken and currencies such as the euro gain as investors piled into assets seen as carrying higher risk.
“There has been some discussion of late of good numbers being dollar-supportive, this likely proving a rather back-to-the-future view, as opposed to recent binary assumptions relating to risk appetite,” said Jeremy Stretch currency strategist at CIBC.
A payrolls gain of more than 200,000 would have likely fueled a test of 81.31 by the dollar index while sinking the euro versus the dollar, he said. But Stretch also noted that end-of-week profit taking and heavy existing short positions against the euro could limit the shared currency’s downside.
Up against Canadian dollar
Also Friday, the U.S. dollar gained ground versus its Canadian counterpart after Canada’s statistical agency said the country added 17,500 net jobs in December, while the unemployment rate edged up to 7.5% from 7.4%.
Economists surveyed by Dow Jones Newswires had forecast an increase of 20,000 to go with a steady unemployment rate of 7.4%.
The U.S. unit USDCAD +0.16% erased weakness to trade at 1.0215 Canadian dollars, a rise of about 0.2%.
Among other major currency pairs, the British pound GBPUSD -0.31% fetched $1.5450, down from $1.5489 late Thursday.
The dollar traded at 77.29 Japanese yen USDJPY +0.01% , from ÂĄ77.10 Thursday.
