By Deborah Levine and William L. Watts, MarketWatch
NEW YORK (MarketWatch) — The dollar turned lower on Friday, after a volatile period following a Labor Department report showing the U.S. economy added fewer jobs in April than expected, reinforcing worries that growth is slowing from an already-tepid pace.
However, jobs added in March and February were revised up enough to make up for the drop in April, analysts at TD Securities said.
The ICE dollar index DXY -0.11% , which measures the greenback against a basket of six major currencies, fell to 79.205, off from 79.302 before the data and compared with 79.213 late Thursday.
The euro EURUSD +0.1873% gained to $1.3153, from $1.3131 earlier and $1.3151 in late North American trading Thursday.
Against the Japanese yen, the dollar USDJPY -0.3306% fell to ¥80.03, compared with ¥80.21 in the previous session.
The economy created just 115,000 jobs last month and the unemployment rate fell slightly to 8.1% from 8.2% — almost entirely due to people stopping looking for work. Read story on payrolls.
The labor market is seen as key to the Federal Reserve’s outlook on the economy and whether or not more easing measures, like bond purchases, are merited. A so-called third round of quantitative easing is seen as devaluing a currency.
“The headline disappointment increases the likelihood that [Fed Chairman Ben] Bernanke will move forward with QEIII later this summer in an attempt to further bolster employment growth,” said Michael Woolfolk, senior currency strategist at Bank of New York Mellon.
The euro was lower before the U.S. data as attention turns to big events in European politics this weekend.
President Nicolas Sarkozy faces off against Socialist challenger François Hollande in France’s presidential runoff vote on Sunday, when voters in Greece also go to the polls in parliamentary elections. Read about the weekend elections.
“There is still a transmission mechanism for events in Greece to be a significant driver for markets and that is through a breakdown in the political process that results in threats of a messy euro-zone exit,” said Elsa Lignos, senior currency strategist at RBC Capital Markets. The firm still believes that the euro zone will stay together.”
Local elections will also take place in Italy, while the small German state of Schleswig-Holstein will hold a regional election.
Also Friday, the euro-zone composite purchasing managers' index for April fell more than expected, pointing to a deepening contraction in private-sector activity. See more on Euro-zone PMI.
The British pound GBPUSD +0.0755% traded at $1.6187, little changed from Thursday.
The Australian dollar AUDUSD -0.5951% extended losses to $1.0209, from $1.0258 Thursday. On Friday, the Reserve Bank of Australia downgraded its growth forecasts, just days after the central bank cut its policy interest rate by an unexpectedly large half a percentage point. Read more on RBA forecasts.
Deborah Levine is a MarketWatch reporter, based in New York.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt. Sarah Turner in Sydney contributed to this report.
