MW: Dollar recovers from drop after U.S. jobs data
By Deborah Levine and William L. Watts, MarketWatch
NEW YORK (MarketWatch) — The dollar rose in volatile trading on Friday after a report showed the U.S. economy shed more jobs than economists had anticipated, especially in the government sector.
Analysts said the worse the number is, the more likely the Federal Reserve is to start a new asset-purchase program to prop up the economy, an expectation that has been weighing on the dollar for weeks.
The dollar index (DXY 77.30, -0.09, -0.12%) a measure of the U.S. unit against a basket of six major currencies, rose to 77.517, compared with 77.462 on Thursday. It dropped to 77.204 just after the jobs report was released.
The euro (EURUSD 1.3925, +0.0010, +0.0719%) fell to $1.3889, compared with $1.3914 in late North American trading on Thursday. It briefly jumped to $1.3984 earlier. See more tools on currency trading.
The dollar had recently fallen to its lowest level since February against the euro amid creeping worries that the Fed will implement another round of bond-buying as part of a renewed quantitative-easing strategy, intended to underpin the U.S. economy, as early as next month.
Traders may be adjusting bets against the dollar after its lost so much ground on expectations of a weak payrolls report and the Fed’s response.
The Labor Department said that U.S. private employers added 65,000 jobs in September, fewer than economists had forecast. Total employment, including government workers, fell by 95,000 last month. Read more on U.S. jobs data.
“Given the broad-based decline in employment during the recession, we would need to add 300,000 jobs per month for the next few years to get the unemployment rate down to an ‘acceptable’ level,” said Dan Greenhaus, chief economic strategist at Miller Tabak.
“In light of the fact that such job creation is not materializing, we are going to find out how policy makers respond and markets react to an environment in which the unemployment rate is uncomfortably high for an extended period of time,” he wrote in a note.
Also on traders minds, international finance officials will hold discussions this weekend on the sidelines of the International Monetary Fund and World Bank annual meetings in Washington.
“If the payroll data and/or the IMF/World Bank meetings give the dollar a pick-me-up, we suspect that the market will just drive it down again,” said Steve Barrow, currency and fixed-income strategist at Standard Bank.
St. Louis Federal Reserve Bank President James Bullard warned in a television interview Friday morning, however, that it’s not clear whether the Fed will decide next month to implement additional easing. The Federal Open Market Committee is scheduled to meet Nov. 2-3.
“I think this upcoming FOMC meeting is going to be a tough call. ... The economy has slowed, but it hasn’t slowed so much,” Bullard told CNBC. Read about Bullard’s comments.
Canada, Japan
The U.S. dollar rose against the Canadian dollar after Canada’s statistics agency reported an unexpected fall in jobs.
One U.S. dollar (USDCAD 1.0179, -0.0001, -0.0098%) bought 1.0208 Canadian dollars, a gain of 0.2%.
Statistics Canada said the country lost 6,600 net jobs last month, while the unemployment rate fell to 8% from 8.1%. Economists surveyed by Dow Jones Newswires had forecast a net gain of 10,000 jobs, while the unemployment rate was expected to hold steady at 8.1%.
The British pound (GBPUSD 1.5917, +0.0048, +0.3025%) traded at $1.5874, little changed on the day.
Against the Japanese yen, the dollar (USDYEN 81.8000, -0.5000, -0.6075%) fell to ¥82.06, compared with ¥82.39 late Thursday.
The yen briefly weakened early in the session, after Japan’s Ministry of Finance released current-account data showing China sold yen in August. Read more on China selling yen assets.
Finance Minister Yoshihiko Noda vowed that the government would take “decisive action, including intervention, if necessary,” to curb gains in the yen, after the dollar fell to a fresh 15-year low of ¥82.11 Thursday on the EBS trading platform.
With finance ministers from the Group of Seven nations set to meet in Washington later Friday, currencies are likely to be a key topic. But Noda told a press conference that “Japan’s stance on foreign-exchange issues will not change either before or after the [Group of Seven] meeting.”
Separately, the Australian dollar bought 97.78 U.S. cents, a loss of 0.4%, after rising as high as 99.20 cents on Thursday. Many analysts say the Aussie is on track to reach parity with the greenback for the first time since July 28, 1982. Read more on Australian dollar.
