MW: Dollar rises on better-than-expected jobs data
By Saumya Vaishampayan and Carla Mozee, MarketWatch
NEW YORK (MarketWatch) — The U.S. dollar gained Friday as the U.S. economy added more jobs than expected in April and the unemployment rate fell to its lowest level since December 2008.
The economy added 165,000 jobs last month and the jobless rate declined to 7.5% from 7.6%, despite a larger labor force. Economists polled by MarketWatch had expected a gain of 135,000 with an unchanged jobless rate of 7.6%.
The ICE dollar index DXY +0.30% , a measure of the greenback’s moves against six other major currencies, rose to 82.508 from 82.234 late Thursday.
The dollar index was at 81.988 before the jobs data were released.
The WSJ dollar index XX:BUXX -0.40% , a rival gauge of the currency’s moves against a slightly wider basket, rose to 73.80 from 73.74.
The data follow the Federal Reserve’s decision this week to continue its program of buying $85 billion a month in assets until there’s substantial improvement in the labor market. But the central bank also said it could accelerate or slow asset purchases as the outlook for the labor market or inflation changes.
An unemployment rate of 6.5% has been mentioned by the Federal Reserve as one of its indicators for a shift in monetary policy.
Labor-market improvement may suggest the potential for a trimming of the Fed’s bond-buying program, wrote Forex.com senior currency strategist Eric Viloria to clients late Thursday.
“When markets begin to price in a reduction of QE (which occurred recently when the Fed discussed tapering asset purchases), the dollar benefits, as fewer purchases means less dollars being printed by the central bank,” Viloria said of the Fed’s quantitative easing.
“On the other hand, an increase in the size or pace of QE would suggest an increase in the supply of dollars which tends to have a negative impact on the dollar,” he said.
Euro inches back up
The euro EURUSD -0.05% exchanged hands at $1.3052, down from with $1.3060 late Thursday in North America. The European Commission on Friday slashed growth forecasts and now expects gross domestic product will decline 0.4% in 2013 compared to earlier expectations of a 0.3% drop.
The euro sank more than 1% Thursday after European Central Bank President Mario Draghi said the central bank was technically ready to lower the deposit rate — currently at zero — and was open-minded to such a change. Negative deposit rates are a way for central banks to encourage banks to lend money.
Draghi’s comments followed the ECB’s widely expected decision to cut its key policy interest rate by a quarter-percentage point to 0.5%, on the back of weak economic data in the euro zone.
Also Friday, the dollar USDJPY +1.17% rose to 99.04 Japanese yen, up from ÂĄ97.99 late Thursday.
The British pound GBPUSD -0.11% traded at $1.5502 compared with $1.5530, while the Australian dollar AUDUSD +0.23% bought $1.0258, stronger than $1.0246.
Saumya Vaishampayan is a MarketWatch reporter based in New York. You can find her on Twitter @saumvaish.
Carla Mozee is a reporter for MarketWatch, based in Los Angeles. Follow her on Twitter @MWMozee.
