MW: Dollar drops 1% on heels of weak U.S. jobs data
By Sue Chang and Deborah Levine, MarketWatch
SAN FRANCISCO (MarketWatch) — The dollar extended losses on Friday, pushing the euro to its highest since June, after a weaker-than-expected U.S. employment report raised expectations of further bond purchases by the Federal Reserve.
The ICE dollar index DXY -1.07% , which measures the greenback against a basket of six currencies, fell by 1% to 80.247 from 81.089 in late North American trading Thursday.
The WSJ dollar index XX:BUXX -0.98% , which measures the dollar against a slightly larger basket, also sank 1% to 70.03 from 70.75.
The euro EURUSD +1.21% jumped to $1.2790, rallying from $1.2640 late Thursday. It hasn’t closed above $1.27 since June.
The Labor Department said the U.S. economy added 96,000 jobs last month, far fewer than economists expected. Read story on jobs report.
A string of weak data is likely to bolster the case for the Fed to roll out a third round of bond-buying program, often referred to as quantitative easing.
“The much anticipated third-quarter recovery has yet to materialize. The details were just as bad as the headline disappointment today, with negative revisions, a loss in household jobs for the second month and a loss in the civilian labor force for the second month. If the Fed was waiting for a reason to pull the trigger on QE3, this is the catalyst,” said Michael Woolfolk, managing director of BNY Mellon Global Markets, in a note.
While the August unemployment rate declined to 8.1% from July’s 8.3%, this was mostly a result of people dropping out of the workforce — not a positive development.
“We believe this weak print continues to reflect structural weaknesses in the U.S. economy that the Federal Reserve will address next week at their Sept. 13 FOMC meeting,” said Christopher Vecchio, a currency analyst at DailyFX.
Prior to the data, the dollar had been under pressure as a fresh round of stimulus measures from China served to boost buying in riskier assets like stocks. Read about China’s stimulus plan.
Euro, Australian news
The euro rose on Thursday after European Central Bank chief Mario Draghi detailed a plan to buy an unlimited amount of euro-zone government bonds.
The British pound GBPUSD +0.52% also rose to $1.6021, up from $1.5926 late the previous day.
Against the yen USDJPY -0.89% , the dollar bought ÂĄ78.13, slipping from ÂĄ78.91 late the previous day, when the dollar jumped by the most in three weeks against the Japanese currency.
The Australian dollar AUDUSD +1.02% traded at $1.0389, rising from $1.0287.
While Australia’s July trade deficit came in worse than expected, “it was consistent with the poor trade data throughout the Asia-Pacific region in July,” said Michael Turner, a strategist at RBC. Read more on Australian trade data .
Turner said that an announcement of new infrastructure plans from China “and the usual pre-data chatter of monetary easing … has lent some support to the Australian dollar.”
William Watts and Sarah Turner contributed to this report.
