FOREX-Dollar gains vs yen, euro on strong jobs data

Fri May 6, 2011 9:10am EDT

Related Topics

* Surprise U.S. jobs data lifts dollar vs yen, euro

* Commodity-linked and risk-sensitive currencies rise

* Low interest rates still seen weighing on dollar

(Updates prices, adds U.S. data, comment, changes byline)

By Steven C. Johnson

NEW YORK, May 6 (Reuters) - The dollar rose against the euro and yen on Friday after data showed U.S. employers added more jobs than expected last month, suggesting the economy may not be slowing as much as some had feared.

The dollar rose most against the yen, trading up 0.7 percent at 80.73 yen JPY= as the addition of an unexpectedly large 244,000 new jobs in April lifted U.S. bond yields, increasing the greenback's appeal over the Japanese currency.

The euro fell as low as $1.4455 EUR=, retreating further from a recent 17-month high above $1.49, but rebounded to trade at $1.4518, down about 0.1 percent.

"We've had a string of very weak U.S. data, so we will have to assess whether that is coming to an end or whether this number is an aberration," said Steven Englander, head of G10 FX strategist at Citigroup.

The dollar did not do as well against higher-yielding currencies that tend to be more sensitive to risk appetite.

The Australian dollar rose 1.7 percent to $1.0757 AUD=D4, making up some losses seen after fears of weaker U.S. and world growth on Thursday prompted investors to cut risky trades. It also got a boost when the Reserve Bank of Australia warned a further rate rise may be needed. [ID:nL3E7G607H]

Oil pared losses to trade around $99 a barrel but remained well off a 2011 high above $114 hit earlier this week.

A large fall in commodity prices, including oil's roughly 10 percent decline, boosted the dollar on Thursday.

"Different currencies have different sensitivities to risk, so the dollar won't gain as much against the Australian dollar, for instance, as against the yen," Englander said.

For now, the euro was facing resistance around its 21-day moving average of $1.4576.

Some traders, though, said the euro was still likely to gain against the dollar in the medium term, as euro zone interest rates are expected to rise much more quickly than those in the United States.

The euro fell nearly 2 percent on Thursday after the European Central Bank President Jean-Claude Trichet signaled a rate hike was unlikely next month but left the door open to a move in July.

"We've had a healthy correction in euro/dollar, but I don't think this is a sea-change in sentiment and wouldn't expect it to move much below $1.45," said Paul Robson, currency strategist at RBS.

The euro gained some support after ECB official Ewald Nowotny said the bank's stance should not be interpreted as dovish. [ID:nHEL010146]

On the U.S. side, the payrolls data showed the jobless rate rose from 8.8 percent to 9 percent in April.

"The U.S. administration likes to state that currencies should reflect economic fundamentals," said Douglas Borthwick, managing director of Faros Trading. "The U.S. economy remains weak, and so shall the dollar." <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Graphic on commodity moves: r.reuters.com/nab49r

Dollar/commodity correlations: r.reuters.com/wex39r ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

(Additional reporting by Jessica Mortimer in London; Editing by Chizu Nomiyama )

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