MW: Dollar recovers as attention turns to U.S. payrolls
Euro higher earlier after ECB's Trichet talks up economy, stress tests
By Deborah Levine and William L. Watts, MarketWatch
NEW YORK (MarketWatch) -- The U.S. dollar pared losses to sit nearly unchanged against the euro and other major rivals on Thursday, as traders were hesitant to make large bets ahead of Friday's U.S. payrolls report for July, which is expected to show private employers hired while overall payrolls dropped.
The euro had been higher earlier after European Central Bank President Jean-Claude Trichet gave a positive spin to second-quarter economic numbers and stress tests of the European banks.
"The market is very tense ahead of the nonfarm payrolls report," said Dean Popplewell, chief currency strategist at Oanda. "The market is hoping for nonfarm payrolls to be an impetus for some sort of dollar buying."
The dollar index (DXY 80.92, +0.02, +0.03%) , a measure of the greenback against a trade-weighted basket of major currencies, slipped to 80.912, down from 80.981 in late North American trading Wednesday. It fell as low as 80.529 as Trichet's monthly news conference began.
The euro (EURUSD 1.3149, -0.0001, -0.0076%) traded at $1.3154, down slightly from $1.3157 Wednesday. It topped $1.32 earlier.
The British pound (GBPUSD 1.5855, -0.0031, -0.1952%) declined to $1.5851, compared to $1.5889, after initially holding steady after the Bank of England left its key interest rate unchanged, as expected.
The dollar (USDYEN 85.8500, -0.4700, -0.5445%) bought ¥85.88, down from ¥86.24 late Wednesday but still well off recent lows below the ¥85.50 level.
The U.S. economy is expected to have lost 60,000 jobs in July, according to the median estimate of economists surveyed by MarketWatch before Friday's Labor Department report. That's mostly due to firing by the government after the census was completed. Private-sector employers are forecast to have added 100,000 jobs.
If the private number comes in notably higher, "we may see a mini dollar rally to test $1.30" against the euro, Popplewell said.
He also noted that many traders have stop-loss orders above $1.3250, meaning if the euro rises above that, traders will sell it.
The dollar dropped sharply against the yen after the U.S. Labor Department said the number of Americans applying for initial unemployment benefits climbed by 19,000 to 479,000 in the latest week. Economists surveyed by MarketWatch had expected state claims to drop to 453,000. Read about U.S. jobless claims.
European rates, data
Trichet also said the second half of 2010 was likely to be "much less buoyant" than the second quarter. It's was too early to "declare victory" in the economic crisis, he said. Read about ECB, Trichet.
He noted that the European bank stress tests completed last month have helped increase transparency and marked a step toward restoring market confidence in the banking sector.
Analysts had speculated that Trichet might discuss the ECB's plans for its special liquidity provisions -- whether to continue withdrawing them or expand them. Trichet indicated the ECB will decide on that next month.
