Dollar extends gains after ADP payrolls report, weekly jobless claims
By William L. Watts and Michael Kitchen, MarketWatch
FRANKFURT (MarketWatch) — Worries over European bank capital and a mixed reception for a French bond auction kept the euro under pressure Thursday, with the shared currency falling to its lowest level in nearly 16 months versus the U.S. dollar.
The euro EURUSD -1.09% slumped to $1.2840, down from $1.2939 late Wednesday in North American trading.
The euro EURJPY -0.57% also dropped 0.6% against the Japanese yen, down 0.6% to ÂĄ98.62, trading at levels unseen since 2001.
The dollar index DXY +0.94% , a measure of the greenback against six major currencies, rose to 80.610 from 80.119 late Wednesday.
“As widely expected, there has been absolutely no let-up this year in the mood of euro doom,” said Michael Derks, chief strategist at FxPro in London.
“Worries about the massive refunding task of euro-zone sovereigns and banks in the first half of 2012, fears that Europe is already in recession, and concerns that most European banks will struggle to raise capital are weighing on the single currency once more,” he continued.
Shares of Italy’s UniCredit SpA IT:UCG -16.23% fell sharply for a second day, after the bank announced Wednesday that it would sell new shares at a steep discount. Spanish banks were under heavy pressure after the government said the sector would need to raise 50 billion euros in additional capital. Read Europe Markets: Europe stocks drop as banks sell off.
France sold €8 billion of new bonds, with yields nudging slightly higher amid demand that analysts pegged as respectable. The sale did nothing to buoy the euro. See related story on European funding needs.
“The French bond auction may have seen reasonable results, seeing respectable cover ratios, but the market reaction can be described as lackluster at best,” said Jeremy Stretch, currency strategist at CIBC.
Although the amount sold was at the top end of the French Treasury’s range, ongoing fears about the sustainability of France’s triple-A credit rating — and the implications for the rating of the euro-zone bailout fund, the European Financial Stability Facility — and bank funding worries have kept pressure on the euro, despite heavy net short positions against the euro already being in place, he said.
U.S. data
Data in the U.S. have also been more positive of late, which some analysts expect to revert to a more traditional correlation with a strengthening dollar.
The dollar extended gains on Thursday after an estimate based on a sampling of ADP payrolls data said private employers added 325,000 jobs in December, more than the 178,000 forecast, according to RBC Capital Markets.
Just after that, markets had little reaction to a government report showing said weekly jobless claims fell to 372,000, close to what economists expected.
Still to come is the Institute for Supply Management’s index of activity in the nonmanfacturing sector at 10 a.m. Eastern time.
Against the yen, the dollar USDJPY +0.48% rose to ÂĄ76.94, up from ÂĄ76.73.
The Japanese government on Thursday dismissed U.S. criticism of its unilateral intervention efforts in August and October aimed at weakening the yen. An unnamed senior Japanese government official told reporters in Tokyo that there was no change in Japan’s policy of taking appropriate action if needed, Dow Jones Newswires reported.
Nevertheless, ongoing downside risks for the euro-yen cross will likely continue to keep the yen well supported, Stretch said.
Also Thursday, the British pound GBPUSD -0.83% lost ground to $1.5528, down from $1.5612 despite a stronger-than-expected reading on activity in the British services sector in December. The purchasing managers index for services rose to 54.0 from 52.1 in November, hitting a five-month high. A reading of more than 50 indicates growth in activity.
Meanwhile, the Hungarian currency continued to plumb all-time lows versus the euro before trimming losses after the country’s chief negotiator with the International Monetary Fund signaled the government was open to discuss a standby loan without preconditions. Read about Hungary’s IMF negotiations.
The forint hit an all-time low at 324.22 per euro, according to FactSet Research. It changed hands in recent action at 30.58 per euro, a loss of 0.4%.
