FOREX-Dollar at 4-month low vs euro as US jobs data points to QE
* Dollar falls to near four-mth low vs euro, one-mth low vs yen * Investors see more U.S. stimulus after U.S. jobs data * ECB bond-buying plan lifts appetite for riskier currencies NEW YORK, Sept 7 (Reuters) - The dollar fell to a near four month low against the euro and a one month low against the yen on Friday after a smaller-than-expected rise in U.S. nonfarm payrolls prompted bets the Federal Reserve will pump additional money into the sluggish economy. Investors were focused on the August data to gauge whether the Fed will launch another round of bond-buying after its policy meeting next week and market reaction was immediate. Under the program, known as quantitative easing, the Fed prints money to buy bonds, which depresses Treasury yields and encourages investors to seek higher returns elsewhere. An increase in the money supply erodes the value of the dollar. Nonfarm payrolls increased only 96,000 last month, the Labor Department said on Friday. The unemployment rate dropped to 8.1 percent from 8.3 percent in July but this was largely due to Americans giving up the search for work. The lackluster report keeps the pressure on U.S. President Barack Obama ahead of the November vote in which the health of the economy looms large. While dollar investors may not have a favored candidate, the uncertainty of the election is beginning to weigh on the currency. "This weak employment report, in jobs, wages, hours worked and participation is probably the last piece the Fed needs before launching another round of quantitative easing next week," said Joseph Trevisani, chief market strategist at Worldwide Markets in Woodcliff Lake, New Jersey. "QE will boost equities, damage the dollar and do little for the economy, but what else can an activist Fed do?" The euro rose as high as $1.2806, its strongest since late May, knocking out reported option barriers at $1.2660 and $1.2700. It last traded at $1.2782, up 1.2 percent. The euro was already higher before the U.S. jobs report as investors cheered the European Central Bank's plan announced on Thursday to lower borrowing costs for Spain and Italy. ECB President Mario Draghi, backing up his promise to do whatever it takes to preserve the euro, unveiled a new and potentially unlimited bond-buying program aimed at lowering painfully high borrowing costs for stressed member states. Yields on Spanish 10-year government bonds fell below 6 percent for the first time since May, while Italian yields also dropped, lifting the euro across the board. The common currency rose to its highest against the Swiss franc in eight months. "Draghi did not deliver any surprises," said Alan Ruskin, head of G10 FX strategy at Deutsche Bank in New York. "But that completely misses the point. Draghi delivered." Market speculation that the Swiss National Bank could raise its floor against the euro to 1.22 Swiss francs from 1.20 also prompted hedge funds to unwind bets the euro would fall. At the session peak, the euro climbed to a two-month high against the yen and an eight-month high against the Swiss franc. YEN The jobs data also gave a huge boost to the yen. The dollar fell 0.9 percent to 78.10 yen, with the low at 78 yen. Leading up to the report, the yen had ceded ground against the dollar this week after stronger-than-expected data on U.S. private-sector employment triggered a rise in Treasury yields. But that sentiment was obliterated as New York trading opened. "We believe this weak print (in the jobs report) continues to reflect structural weaknesses in the U.S. economy that the Federal Reserve will address next week at their September 13 FOMC meeting," said Christopher Vecchio, Currency Analyst at DailyFX. For the week, the euro gained 1.7 percent against the dollar, narrowly the best week since the end of February at current prices, while the dollar lost 0.3 percent against the yen, the third straight week of declines. The Australian dollar rose 1.1 percent to $1.0389, adding to Thursday's gains. A flood of Chinese data on Sunday could provide a challenging backdrop for the Australian dollar, which has retreated over the past month on worries about a slowdown in China, Australia's single biggest export market.
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